We don't need to be economists to expect the obvious 'should-be' effects after the economic surgery by the IMF. Shouldn't the hard work have paid off?
As a naive Korean, I, like probably many other Koreans at that time, would have followed the simple logic below:
Korean economy bankrupt -> Couldn't meet the loan claims
-> Paid out through the IMF bail-out -> Calmed down loan creditors
-> Even paid out all IMF rescue funds -> Free from the debt trap?
Well..It appears even worse! (The red line shows "Gross External Debt")
GROSS EXTERNAL DEBT - <Source from Bank of Korea : http://ecos.bok.or.kr >
Another logical progression would be...
Economic Chaos -> the value of Korean currency went to wild
-> Hard training from IMF -> Stabilising the Korean won exchange rate ?
When looking at the history of the foreign exchange rate of the Korean Won against the U.S. dollar, it seemed to cool-down after the 1997 roller coaster ride, at least before the 2008 crisis hit. However, the fluctuation of the worth of the Korean currency appears to have remained and kept accumulating the volatility in its foreign exchange market. The red-line indicate the actual value of the Korea currency to 1 USD and the blue line indicates the percent of change from the previous period.
EXCHANGE RATE AND % CHANGE <Source from Bank of Korea : http://ecos.bok.or.kr >
Of course, these two graph couldn't tell us the whole story of what happened. Moreover, it is quite presumptuous to draw a conclusion based on such a simple fact. Yet, I do believe that analyzing the components of the foreign debt and finding the cause of increasing sensitivity in the Korean currency would provide more focused insights into the root of the crises.
As a naive Korean, I, like probably many other Koreans at that time, would have followed the simple logic below:
Korean economy bankrupt -> Couldn't meet the loan claims
-> Paid out through the IMF bail-out -> Calmed down loan creditors
-> Even paid out all IMF rescue funds -> Free from the debt trap?
Well..It appears even worse! (The red line shows "Gross External Debt")
Another logical progression would be...
Economic Chaos -> the value of Korean currency went to wild
-> Hard training from IMF -> Stabilising the Korean won exchange rate ?
When looking at the history of the foreign exchange rate of the Korean Won against the U.S. dollar, it seemed to cool-down after the 1997 roller coaster ride, at least before the 2008 crisis hit. However, the fluctuation of the worth of the Korean currency appears to have remained and kept accumulating the volatility in its foreign exchange market. The red-line indicate the actual value of the Korea currency to 1 USD and the blue line indicates the percent of change from the previous period.
Of course, these two graph couldn't tell us the whole story of what happened. Moreover, it is quite presumptuous to draw a conclusion based on such a simple fact. Yet, I do believe that analyzing the components of the foreign debt and finding the cause of increasing sensitivity in the Korean currency would provide more focused insights into the root of the crises.
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