The Dangers of Letting Money Float

By Jaewoo Jang. Stanford University. 

The emergence of South Korea as one of four Asian tigers in the early 1990s was a facade of success based on an unsustainable and premature financial structure. The government’s imposition of the financial liberalization policy induced an environment where domestic con- glomerates could borrow loans and manipulate capital without extensive government scrutiny. This paper examines the ways in which the rapid liberalization of the financial market in Korea set the climate of collapse in the Korean economy in 1998. Then, this research observes how the large conglomerates took advantage of this sudden shift and eventually brought about the financial crisis of 1998.

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