ME  Vol.3 No.8 , December 2012
Legacy of the Asian Currency Crisis: The Case of Korea
ABSTRACT
This paper reexamines the long run effects of the 1997 Asian crisis on the Korean economy. Using unobserved components models subject to Markov regime-switching, we address two questions:1) whether the output losses of Koreaduring 1997-1998 were permanent or transitory;2) when the trend growth rate decreased. Estimation results suggest that the trend growth rate of the Korean economy has already declined around 1992-1993 prior to the 1997 crisis, and given the transition of the Korean economy into the low-growth regime in the early 90s, the effects of the crisis are mainly transitory.

Cite this paper
J. Kim and G. Lim, "Legacy of the Asian Currency Crisis: The Case of Korea," Modern Economy, Vol. 3 No. 8, 2012, pp. 939-942. doi: 10.4236/me.2012.38118.
References
[1]   J. D. Hamilton, “A New Approach to the Economic Analysis Nonstationary Time Series and the Business Cycle,” Econometrica, Vol. 57, No. 2, 1989, pp. 357-384. doi:10.2307/1912559

[2]   M. Friedman, “Monetary Studies of the National Bureau,” National Bureau of Economic Research, New York, 1964.

[3]   M. Friedman, “The Plucking Model of Business Fluctuations Revisited,” Economic Inquiry, Vol. 31, No. 2, 1993, pp. 171-177. doi:10.1111/j.1465-7295.1993.tb00874.x

[4]   V. Cerra and S. C. Saxena, “Did Output Recover from the Asian Crisis,” IMF Staff Paper, Vol. 52, No. 1, 2005, pp. 1-23.

[5]   C. U. Huh and K. Nam, “A Preview of Tale of Korea’s Two Crises: Distinct Aftermaths of 1997 and 2008 Crises,” The Journal of the Korean Economy, Vol. 11, No. 1, 2010, pp. 1-29.

[6]   C.-J. Kim and C. Neslon, “Friedman's Plucking Model of Business Fluctuations: Tests and Estimates of Permanent and Transitory Components," Journal of Money, Credit and Banking, Vol. 31, No. 3. 1999, pp. 317-334. doi:10.2307/2601114

[7]   J. C. Morley, C. R. Nelson and E. Zivot “Why Are the Beveridge-Nelson and Unobserved-Components Decompositions of GDP So Different?” Review of Economics and Statistics, Vol. 85, No. 2, 2003, pp. 235-243. doi:10.1162/003465303765299765

[8]   R. J. Barro, “Economic Growth in East Asia before and after the Financial Crisis,” In: D. T. Coe and S.-J. Kim, eds., Korean Crisis and Recovery, IMF, Washington DC, 2002, pp. 333-352.

[9]   R. J. Barro and J.-W. Lee, “Growth and Investment in East Asia before and after the Financial Crisis,” Seoul Journal of economics, Vol. 16, No. 2, 2003, pp. 84-118.

[10]   C.-J. Kim, “Dynamic Linear Models with Markov- switching,” Journal of Econometrics, Vol. 60, No. 1-2, 1994, pp. 1-22. doi:10.1016/0304-4076(94)90036-1

 
 
Top