State, financial liberalization and financial crisis : lessons from the Korean financial crisis 1997-98

다국어 초록 (Multilingual Abstract)

STATE, FINANCIAL LIBERALIZATION, FINANCIAL CRISIS: LESSONS FROM THE KOREAN FINANCIAL CRISIS 1997-98

In the era of financial globalization, for developing economies that are characterized by weak financial system and limited capital sources the biggest challenge is to achieve and sustain economic growth while avoiding financial crisis. The study aims to clarify causal mechanisms between economic performance and political determinants regarding with a financial crisis in developing economies. And next objective of the study is to draw some lessons from the Korean financial crisis. Korea and Mongolia both have experienced negative effects of financial globalization. Nevertheless outcomes which resulted by response adjustments to financial crisis were different. The Korean financial crisis experience presented that advancing the economy utilizing foreign capitals requires not only fiscal discipline, but also political coherence. Taking these response adjustments into account as a dependent variable, the study attempts to explain why those outcomes resulted and to find out what should to do in order to mitigate structural vulnerabilities in Mongolia.
The study involved two kind of qualitative method. As a cross national comparative research, the study examined commonalities and differences in the process of financial liberalization and financial crisis two cases. The differences between the cases were used to explain outcomes; such as how dissimilar contexts of political arrangements impact on the evolution of financial crisis and responses to them. And process tracing method was employed to analyze this interdisciplinary study. By using the method, the study is expected to deliver a systematic description of the phenomena with in broad theoretical framework. In addition, by questionnaire study based on financial experts, we have confirmed empirical study results.
The results demonstrate strong support for the hypothesis that characteristics of political system and functions of formal or informal institutions are crucial to stability in financial market. Balance of veto-players in political decision making mechanisms affects magnitude and duration of financial crisis directly determining the cost and time implementation of crisis response. Moreover highly sophisticated informal institutions that connects the state and businesses also contribute to solving structural vulnerabilities quickly through enabling mutual understanding and common interests of market participants.
Research results suggest that monitoring on external debt growth and its quality, providing industrial trend information to enterprise through observing their investing and borrowing behaviors are essential to avoid financial shocks. Moreover besides of basic adjustments such as strengthening fiscal discipline and enhancing regulatory arrangements over the financial sector, developing countries like Mongolia are needed to establish institutions that support collaboration state and business and to enhance regional and mutual financial cooperation.

국문 초록 (Abstract)

국가, 금융자유화 그리고 금융위기: 1997-98년 한국 금융위기의 시사점

금융세계화 시대 개발도상국가들이 직면하고 있는 가장 큰 도전은 경제성장을 지속시키는 가운데 금융위기를 예방하는 일이 되겠다. 본 논문은 금융위기사례 비교분석을 통해 정치적 요인들과 경제성장간 인과관계 또는 상호작용을 검토하고자 한다. 연구의 다음목적은 한국의 금융위기사례분석을 통해 몽골경제에 유용한 시사점을 도출하는데 있다. 한국과 몽골 양국 다 금융세계화의 부정적 영향을 받았다. 그러나 그 결과는 정부의 위기대응방식과 대응정책내용에 따라 확연히 달랐다. 한국의 금융위기경험은 해외자본을 활용하여 경제성장을 도모하는 과정에서 재정규율뿐만 아니라 정책의 일관성, 정치제도의 역할도 중요하다는 것을 잘 보여주고 있다. 따라서 본 연구는 위기대응으로서 조정정책을 종속변수로 간주하고 몽골경제가 금융불안 또는 통화위기를 빈번히 맞는 이유를 찾아내고, 또한 위기를 야기하는 구조적 취약성을 해결하기 무엇을 해야 하는지를 밝히고자 한다.
본 연구는 질적 연구의 두 가지 방법을 활용하였다. 교차사례 비교연구로서 두 사례의 금융자유화와 금융위기 과정에서의 상이성과 유사성을 검토하였다. 개별사례간 상이성이 설명변수로서 활용되는데, 정치적 조치들이 금융위기 발전과 극복에 있어 결론적 역할을 한다고 가정하였다. 금융위기사례연구는 다양한 분야를 포괄하는 학제간 연구이기 때문에 Process tracing 연구방법을 추가로 활용했다. 금융위기라는 복잡한 현상을 체계적으로 묘사하는데 본 방법이 도움이 된다. 이들 이외에도 저희는 몽골의 금융분야 전문가들 대상으로 설문조사를 진행하여 그 결과를 연구에 반영함으로써 실증연구의 타당성과 신뢰성을 높였다.
연구결과를 통해 정치적 요인들 즉 정치체제의 유형 그리고 공식 또는 비공식 정치제도가 금융시장 안정성에 중요한 역할을 한다는 것을 확인할 수 있었다. 정치적 의사결정 과정에서의 거부권 행사자간 밸런스는 위기대응조치의 비용과 시간을 결정함으로써 금융위기의 규모와 지속기간에 영향을 미치고 있다. 더구나 정부와 기업을 연결하는 비공식 조직제도는 시장참가자들의 공동이익과 상호이해를 도모하여 제도적인 위기취약성을 조속히 해결해나갔는데 기여했다.
연구 결론은 정부는 기업분야 투자 및 차입실태를 고려하여 이들에게 관련산업정보를 제공하고, 특히 이들의 대외부채비율과 구조를 모니터링 하는 것이 중요함을 보여주고 있다. 한편 몽골 같은 개발도상국가는 금융분야의 규제감독과 재정규율강화 이외에도 정부와 기업간 상호협력을 도모하는 제도가 필요하며, 지역 또는 양국간 금융협력이 중요함을 보여주고 있다.

목차 (Table of Contents)

• I. INTRODUCTION 1
• 1.1. RESEARCH QUESTION OF THE STUDY 1
• 1.2. METHODOLOGY OF THE STUDY 5
• 1.3. SELECTION OF CASES 10
• 1.4. SIGNIFICANCE OF THE STUDY 16
• 1.5. ORGANIZATION OF THE STUDY 17
• II. A THEORETICAL REVIEW 19
• 2.1. IPE APPROACHES ON STATE AND FINANICIAL CRISIS 19
• 2.1.1. NEW-MERCANTILISM 20
• 2.1.2. NEO-LIBERALIZM 22
• 2.1.3. NEO-MARXISM 26
• 2.2. FINANCIAL LIBERALIZATION AND DEVELOPING COUNTRIES 30
• 2.2.1. BACKGROUNDS OF FINANCIAL GLOBALIZATION 30
• 2.2.2. WHY STATES PURSUE FINANCIAL LIBERALIZATION 32
• 2.2.3. CHALLENGES TO STATES DURING FINANCIAL LIBERALIZATION 34
• 2.3. FINANCIAL CRISIS AND DEVELOPING COUNTRIES 36
• 2.3.1. THEORETICAL MODELS FOR FINANCIAL CRISIS 37
• 2.3.2. LIMITS OF PREVIOUS APPROACHES 39
• 2.3.3. POLITICAL SOURCES OF FINANCIAL CRISIS 41
• III. FINANCIAL LIBERALIZATION AND FINANCIAL CRISIS IN KOREA 49
• 3.1. BACKGROUNDS OF FINANCIAL LIBERALIZATION 49
• 3.1.1. STATE-LED DEVELOPMENT STRATEGY 50
• 3.1.2. STATE REPRESSION ON FINANCIAL SECTOR 52
• 3.1.3. POLITICAL IMPLICATIONS IN STATE-BUSINESS RELATIONSHIP CONSOLIDATION 56
• 3.2. LAUNCHING OF FINANCIAL LIBERALIZATION 60
• 3.2.1. KIM YOUNG-SAMS GLOBALIZATION POLICY 61
• 3.2.2. FINANCIAL LIBERALIZATION PROCESS 65
• 3.2.3. FINANCIAL LIBERALIZATION IMPACTS ON THE STATE-BUSINESS RELATIONSHIP 69
• 3.3. BREAK OUT THE CRISIS 71
• 3.3.1. CORPORATE FAILURE 72
• 3.3.2. FINANCIAL INSTITUTIONS INSOLVENCY 77
• 3.3.3. CONTAGION EFFECT OF EAST ASIAN FINANCIAL CRISIS 79
• 3.3.4. IMF BAILOUT 82
• 3.4. ACCOUNTS FOR THE KOREAN FINANCIAL CRISIS 84
• 3.4.1. FUNDAMENTALIST APPROACH 86
• 3.4.2. SELF-FULFILLING APPROACH 90
• 3.4.3. POLITICAL ECONOMY APPROACHES 92
• 3.5. POLICY RESPONSES TO THE FINANCIAL CRISIS 97
• 3.5.1. MACROECONOMIC POLICY REFORMS 98
• 3.5.2. FINANCIAL REFORM 100
• 3.5.3. CORPORATE RESTRUCTURING 106
• 3.5.4. DEBATES ABOUT CRISIS RESPONSES 110
• IV. FINANCIAL LIBERALIZATION AND FINANCIAL CRISIS IN MONGOLIA 113
• 4.1. BACKGROUNDS OF FINANCIAL LIBERALIZATION IN MONGOLIA 113
• 4.1.1. FROM SOCIALISM TO CAPITALISM 114
• 4.1.2. SEEKING FOR THE THIRD NEIGHBORS 116
• 4.1.3. ECONOMIC SIGNIFICANCE OF THE THIRD NEIGHBOR POLICY 119
• 4.2. IMPLEMENTATION OF NEOLIBERAL ECONOMIC POLICY 122
• 4.2.1. STRUCTURAL REFORMS 125
• 4.2.2. FINANCIAL LIBERALIZATION 127
• 4.2.3. TRADE LIBERALIZATION 131
• 4.3. FINANCIAL CRISIS EXPERIENCES IN MONGOLIA 135
• 4.3.1. 1990S BANKING CRISIS 136
• 4.3.2. 2008S GLOBAL FINANCIAL CRISIS IMPACTS 138
• 4.3.3. CURRENT CURRENCY INSTABILITY 143
• 4.4. A POLITICAL ECONOMIC ANALYSIS ON FINANCIAL CRISIS IN MONGOLIA 148
• 4.4.1. ECONOMIC DETERMINANTS OF FINANCIAL CRISIS 150
• 4.4.2. POLITICAL DETERMINANTS TO FINANCIAL CRISIS 157
• 4.5. RECENT POLICY RESPONSES TO MITIGATE STRUCTURAL VULNERABILITIES 167
• 4.5.1. STRENGTHENING SUPERVISION OVER BANKING SECTOR 168
• 4.5.2. ENHANCING PRIVATE SECTOR CAPACITIES 169
• 4.5.3. PROMOTING REGIONAL FINANCIAL COOPERATION 171
• V. COMPARATIVE ANALYSIS OF TWO CASES 173
• 5.1. DIFFERENCES OF TWO CASES 174
• 5.2. SIMILARITIES OF TWO CASES 177
• 5.3. MAIN FINDINGS FROM COMPARATIVE ANALYSIS 180
• VI. CONCLUSION 189
• 6.1. LESSONS FROM THE KOREAN EXPERIENCE 189
• 6.2. RECOMMENDATIONS FOR MONGOLIA IN MITIGATING CRISIS VULNERABILITIES 194
• 6.3. LIMITATIONS OF THE STUDY 199
• BIBLIOGRAPHY 201
• 한국어초록 217