Global financial crisis and the Korean economy

Abstract

This paper examines why the Korean economy is most suffering

from the current U.S. born financial crisis and suggests policies to

overcome it with discerning the features of the current crisis from

the past one. A notable feature of the current crisis is that

excessive securitization by financial institutions and reliance on

financial derivatives widens and deepens the crisis much further

and makes it difficult to assess the damages from the crisis.

Policy suggestions include: The government provide enough liquidity;

the government first restructure financial institutions and lead

corporate restructuring together with them; macro financial regulation

and supervision as well as micro one be emphasized; and a

drastic stimulus package be introduced not only to stimulate the

economy in recession but also to enlarge the long term growth

potential.