Asian Financial Crisis: The South Korean Experience

Why was it that the Korean economy, which had been envied and imitated by other developing economies for the past 30 years, suddenly spiraled into a currency-induced crisis late in 1997? How was it possible that such a vibrant economy, which had been developing so rapidly, displaying in fact the most rapid development amongst the Asian nations, was suddenly overcome by such a severe economic downturn? Why is that even today, the country’s financial system is still unstable, and why are there still some lingering doubts about a fundamental conversion of the economic system? And what are the lessons for other developing economies craving the pursuit of high growth whilst adapting to the new order of the global economy? This paper attempts to address each of these important issues.