The Global Financial Crisis and the Challenges of the Korean Economy

Abstract

This paper analyzes why the U.S. financial crisis evolved into a

global financial crisis, and why the Great Moderation led to the Great

Recession. Then, the U.S. policy responses to the crisis are discussed

and are compared with the policy measures prescribed by the IMF

on the Korean economy immediately after the 1997 Korean Currency

and Banking Crisis. The paper also deals with the sovereign debt

crises of the Euro zone to analyze the needs for macro-prudential

regulation and supervision. The main focus of this paper, however,

is to examine the impacts of the global financial crisis on the Korean

economy, to evaluate the macro-policy measures meant to ride out

the crisis, and to present the major challenges that Korea will face

in the future. Given that internal and external risk factors abound,

along with persistent uncertainties in the Korean economy, the policies

on securing price, financial, exchange rate, and fiscal stability as

well as stable economic growth are recommended.