South Korea's Experience with International Capital Flows
South Korea's Experience with International Capital Flows
This chapter describes the way in which South Korea has managed the capital account during the last twenty years. South Korean reluctance to deregulate reflected a mixture of motivations. South Korean authorities appeared to be proceeding more rapidly with liberalization on outbound flows than on inbound flows, and the country experienced an investment boom between 1994 and 1996 that was increasingly financed by mismatched foreign borrowing. On the whole, South Korean corporations have decreased their leverage, and access to capital is increasingly a function of profitability. Given the specifics of the South Korean situation, freer international capital flows, a less regulated domestic financial system, and an increased role for foreign financial service providers were probably not greatly separable components of financial-sector reform.
Keywords: capital account, South Korea, liberalization, investment, foreign borrowing, international capital flows, domestic financial system
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