Unintended Consequences of Well-Intentioned Policies of South Korea: Lessons for Emerging Economies on Capital Market Liberalisation

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


While South Korea has achieved remarkable economic and democratic transformation during the past decades, it has suffered from two major economic crises, both of which are essentially liquidity crises. In this regard, the purpose of this study is twofold: one is to review the debates on capital market liberalisation and highlight the dark sides of South Korea’s experience. The other is to explain why South Korea has experienced another crisis in 2008 even though it already experienced the same liquidity crisis in 1997. We highlight the unintended consequences of policies with their own legitimate purposes and provide lessons on capital market liberalisation for emerging economies.

Original languageEnglish
Pages (from-to)63-87
Number of pages25
JournalGlobal Economic Review
Issue number1
Publication statusPublished - 2019 Jan 2

Bibliographical note

Funding Information:
Financial liberalisation programme Introduction of corporate paper Privatisation of nationwide commercial banks Abolition of beneficial interest rates on policy loans Alleviation of government intervention in the internal operation of banks Introduction of negotiable CDs Introduction of a band for bank loan rates Indirect opening of the stock market through the Korea Fund Introduction of cash management accounts by short-term finance companies Introduction of bond management funds by securities companies Relaxation of entry barriers to financial industry, including banks, life insurance, lease, and investment trust Opening of the life insurance industry to foreign firms Announcement of phased deposit and loan rate deregulation Opening of the securities industry to foreign firms Announcement of a four-step interest rate liberalisation plan Conversion of some short-term finance companies to securities companies or banks Opening of purchase of individual equity stocks on the Korea Stock Exchange to foreign investors Opening of bond market to foreign investors Abolition of limit on all kinds of bond investment

Funding Information:
This paper is based on the Part 2 of Final Report for KOICA (Korea International Cooperation Agency) DEEP (Development Experience Exchange Partnership) Project with Vietnam, in which the author participated. I thank Bui Duy Hung, Le Van Chien, Nguyen Thang, Chuc Dinh Nguyen, and other scholars at HCMA (Ho Chi Minh National Academy of Politics) for valuable comments. The views expressed herein are those of the author and do not necessarily reflect those of KOICA and HCMA. The usual disclaimers apply.

Publisher Copyright:
© 2018, © 2018 Institute of East and West Studies, Yonsei University, Seoul.

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics, Econometrics and Finance(all)
  • Political Science and International Relations


Dive into the research topics of 'Unintended Consequences of Well-Intentioned Policies of South Korea: Lessons for Emerging Economies on Capital Market Liberalisation'. Together they form a unique fingerprint.

Cite this