Academic journal article NBER Reporter

K. N. Lee

Academic journal article NBER Reporter

K. N. Lee

Article excerpt

In the second session the panelists considered how the creditor panic of late 1997 and early 1998 was resolved. Among the questions considered: How did the late-December 1997 program differ from the earlier December 4 program? What was the effect of the initial IMF programs? Would some combination of devaluation and expansionary monetary policy have avoided the recession?

K. N. Lee started with a Korean central banker's perspective on the turnaround. He stressed the importance of international funds in overcoming the crisis, and the importance of getting the private sector on board. Echoing themes from the first session, he said that the crisis was caused by a sort of herd behavior. To regain investor confidence it was necessary to push for wide ranging economic reforms. Lippton then offered the perspective of a former Assistant Secretary of the U.S. Treasury who had dealt with the Korean crisis. As the Treasury saw it, it was crucial to put in place policies that would restore currency stability and prevent an internal run. He also offered various lesson for similarly crisis-affected countries, including the need for a firm monetary stance to lean against the pressures on the currency and the advantages of starting deep structural reforms to restore market confidence. …

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