Consolidation In Korea Research Articles

Fiscal Policy Issues in Korea after the Current Crisis

This paper examines fiscal policy issues in the Republic of Korea (hereafter Korea) after the 2009 global financial crisis, including the timing of fiscal policy responses, the effectiveness of expansionary measures, and the long-term implications for government debt. In order to evaluate more accurately Korea’s fiscal response since late 2008, this paper conducts an empirical analysis using historical data from Korea and other countries and derives stylized patterns on counter-cyclicality of fiscal policy and its role in the recovery process. The analysis suggests that Korea’s fiscal stimulus in 2009, while having contributed greatly to the economy’s fast recovery, was unusually large compared with typical fiscal responses during economic downturns. This paper also investigates whether the rapid increase in Korea’s fiscal debt burden is admissible in terms of long-term sustainability. Although existing evidence suggests that Korea’s fiscal debt is still manageable, the sizeable deficit and the increasing trend in the debt to GDP ratio in recent years call for vigilance. The paper concludes with some suggestions for fiscal consolidation in Korea: a stricter practice of medium-term budget planning, expansion of automatic stabilizers and reduction of discretionary components, use of more comprehensive measures of government debt, and further reforms in the national pension system are discussed.

What Happened to Efficiency and Competition after Bank Mergers and Consolidation in Korea?

Market concentration in the Korean banking industry has markedly increased since the financial crisis of 1997-1998 because of M&As, P&As, and consolidation of banks. With this change, there has been a growing concern over market power in the Korean banking sector. We examine the effects of market concentration on bank efficiency and competition for the period of 1992-2006. Three different indicators of bank inefficiency are used in this study, including X-inefficiency that is derived from the directional technology distance function. The level of competition is measured by both the H-statistic of the Panzar-Rosse model and the level of the net interest margin and its standard deviation. Empirical results indicate that market concentration has not improved bank efficiency through scale economies or scope economies. Instead, recent mergers, acquisitions and consolidation of banks resulted in an increase in inefficiency measured by the three different indicators: Xinefficiency, labor inefficiency and asset inefficiency. While an increase in market share of individual banks improved bank efficiency, an increase in the overall market concentration ratio resulted in lower efficiency. Our study also finds that the Korean banking sector has been monopolistically competitive throughout the sample period except for the crisis period according to the H-statistic.Although an increase in market concentration ratio has not changed the overall level of bank competition, it has a positive significant effect on the level of the average interest margin.

Democratic Consolidation beyond Political Crisis: An Experience of Korea

In late 20th century, the East Asian region joined the world-wide democratic trend of ‘the third wave.’ Once formidable authoritarian regimes were dismantled and gave way to democratization. The trend began in the Philippines in 1986 and it was followed by South Korea and Taiwan both in 1987. Thailand joined the club in 1992 and Indonesia did the same a couple of years before the new millennium. In those countries, new democratic constitutions were written. With the new constitutions, freedom of political participation was bestowed upon ordinary citizens, civil organizations, political parties, and so on. Free and fair elections have been regularly held since then and the elections, reflecting the hopes of ordinary citizens, installed new civilian political leadership. Not all democratic transitions and consolidations in those countries, however, were without crisis. Despite free and competitive elections and political participation guaranteed by constitutions and by the laws related to elections and political parties, the marches towards further democracy in those countries often look unstable and confusing. The instability was partly due to a sudden explosion of political demands, which had been suppressed for a long time under authoritarian rule. The plethora of political demands could not be smoothly aggregated and articulated in the new born democratic political systems. If the instability of a newly democratized political system continues, then it may endanger the sustainability of a new democracy causing reversal of democracy or return to authoritarianism. Korea, after democratization, has been plagued by various political crises too. The economic crisis in 1997 was a grave test for Korean democracy. With the economic crisis, Korea, for the first time, experienced a peaceful change of political power. Korea’s march towards democracy was thereafter relatively smooth despite minor political scandals. In spring 2004, Korea suddenly plunged into a political crisis when President Roh Moo-Hyun faced impeachment proceedings. This crisis brought about a serious division not only among politicians, but also among ordinary citizens. Also, hot debates on the constitution, on political leadership and civil society were incurred. The presidential impeachment was the first in Korea’s history. It, however, became an important turning point of democratic progress when political leaders and civil society successfully managed and overcame the crisis. This study will first analyze democratic transition and consolidation and secondly analyze the causes of and responses to the political crisis caused by the impeachment of the president through examining the following questions. The main questions of this study are as follows: How did the democratic transition and consolidation in Korea occur? What was the nature of political crisis in Korea after democratization? What was the main reason of the crisis? What sort of problems did the political leadership and civil society have? How did Korea respond to the crisis and overcome the crisis of presidential impeachment? What implications does this process from the beginning to the end of the crisis have for Korean democracy after democratization? Particularly, this study focuses on the political leadership and the political behavior of civil society in the process of democratic transition and consolidation. With these

Has bank consolidation in Korea lessened competition?

This paper examines market concentration and competition in the Korean commercial banking market for the period of 1992–2004. While market concentration decreased due to financial regulation before the Asian financial crisis, the Korean banking industry has become increasingly concentrated in the process of restructuring and consolidation since the crisis. Contrary to a growing concern over market power in Korean banking, this study finds that increased concentration has not lessened competition. The H statistic of the Panzar–Rosse model indicates that the Korean commercial banking market was monopolistically competitive during the pre-crisis period and the post-crisis period with temporary deviation to the level of perfect competition during the crisis period.

Democratic Consolidation in Korea: A Trend Analysis of Public Opinion Surveys, 1997–2001

The Republic of Korea (Korea hereinafter) has been widely regarded as one of the most vigorous and analytically interesting third-wave democracies (Diamond and Shin, 2000: 1). During the first decade of democratic rule, Korea has successfully carried out a large number of electoral and other reforms to transform the institutions and procedures of military-authoritarian rule into those of a representative democracy. Unlike many of its counterparts in Latin America and elsewhere, Korea has fully restored civilian rule by extricating the military from power. As is the case in established democracies of North America and Western Europe, free and competitive elections have been regularly held at all the different levels of the government. In the most recent presidential election, held in December 1997, Korea also established itself as a mature electoral democracy by elevating an opposition party to political power. In Korea today, there is general agreement that electoral politics has become the only possible political game in town.

Institutional reform and democratic consolidation in Korea

A look at the factors that define the Korean model of democratization and the reforms that are still needed to consolidate democracy in Korea.

Institutional Reforms and Democratization in Korea: the Case of the Kim Young Sam Administration, 1993–1998

This article examines the nature of political and institutional reform initiatives that have been carried out under former president Kim Young Sam. How effective have they been in consolidating democracy in Korea? Specifically, we examine why the Kim Young Sam government's political reform campaigns have been limited, and explore the impact of this limitation on his institutional reform initiatives and the process of consolidation of democracy in Korea.We argue that Kim Young Sam's initial political reform campaigns have contributed to creating a favorable environment for his institutional reform efforts. However, limitations of these initial political reform campaigns such as political funding and bribery scandals have hampered institutional reforms. We also argue that these difficulties were intensified by public dissatisfaction with Korea's poor economic performance and International Monetary Fund (IMF) financial assistance. As a result, Kim Young Sam's moral legitimacy as a civilian and reform‐oriented leader toward the public has totally evaporated.Therefore, experiences under the Kim Young Sam administration are just trials and errors of democratization that show another failure in presidential leadership in Korea. These experiences will negatively affect the consolidation process of democracy in Korea by increasing the public's distrust of government as a whole. As a result, democratic consolidation in Korea is being delayed.