FINANCIAL LIBERALISATION AND THE SOUTH KOREAN CRISIS: AN ANALYSIS OF EXPERT OPINION

摘要: This paper provides a novel analysis of the South Korean financial crisis drawing on the findings of a unique survey of IMF/World Bank and South Korean experts. The survey reveals that over-optimism and inadequate recognition of financial risks inadvertently led to excessive risk taking by Korean financial intermediaries. It also indicates that the sources of over-optimistic assessments of East Asian economies were mainly to be found outside East Asia and included the Bretton Woods institutions themselves, western media and analysts. In Korea, weaknesses in risk management were the result of (i) lack of expertise in relation to handling the risks associated with capital flows, and (ii) disincentives to manage risks emanating from a relatively successful history of government provided safety nets for both industry and banking. Financial liberalisation widened risk-taking opportunities, by allowing Korean financial …