Chapter 3: Managing the Great Recession in South Korea and Mexico: Economic Institutions, Domestic Market and Regional Trade
José Luis León-Manríquez* 1. INTRODUCTION Due to globalisation of production and financial exchanges, the 2008/09 global financial crisis (the ‘Great Recession’) spread across the planet with extraordinary swiftness. The mechanisms of contagion of this crisis were at least as diverse as the responses from different countries. For the sake of analytical simplicity, The Economist (10 March 2009) summarized these responses by stating that ‘we are all Keynesians now’. However convincing this statement might seem, it is still worth analysing the mechanisms of transmission as well as the specific answers to the global crisis undertaken by different Asia-Pacific Rim countries. Two interesting comparative cases are South Korea and Mexico, both being manufacturing-export economies of similar size with parallel experiences of trade liberalisation, privatisation and productive restructuring in the 1980s and the 1990s. In terms of gross domestic product (GDP), they ranked as the 14th (Mexico) and the 15th (South Korea) largest economies in the world in 2010 (World Bank 2011). In 2008, both countries experienced a rapid devaluation of their currencies, falling levels of exports and sharp falls in their stock exchange indices. Forecasts made by the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) foresaw moderate declines in their GDPs by the end of 2009. Yet, at the end of that period, Mexico recorded a 6.5 percent contraction in GDP and South Korea a modest growth of 0.2 percent. This chapter argues that the diverging economic performances of South Korea and Mexico during...
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