Korean Currency Crisis and the Reform of International Financial Institutions

Abstract

The currency crisis in Korea, by its nature, had a self-fulfilling element. Therefore an appropriate international lender of last resort could have prevented the worst crisis. In this context the characteristics of the Korean currency crisis and the role of the IMF in the Korean currency crisis are discussed. The IMF could not function as a proper international lender of last resort especially in currency crisis in Korea. Some wrong and even unnecessary conditionalities are required just siding with the creditors.

To function as an efficient international lender and manager of last resort, the IMF must reform itself so that the demands of developing and poor countries can be properly accommodated. Also constructive and innovative alternatives to the current IMF should be continuously explored to prevent and cure future crises more efficiently and economically. A regional crisis lender and manager are needed desperately. The coexistence of both regional and global lenders of last resort will significantly contribute to balancing the current IMF.