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Keun Lee

- tability for a crisis- esilient growth in Korea 117 s r Examining the proposition of Taylor (1998), the capital inflows occur as the interest rate spread (∑i), and/or the capital gain spread (∑Q), opens because of lax public sector regulation, such as financial liberalization. The definitions of spreads are as follows: ∑i = i − [i* + (Δe / e)E] (I) ∑Q = (ΔQ / Q)E − [i* + (Δe / e)E] (C) where (I) is the interest spread equation and (C) is the capital gain spread equation. In the equation, i is the domestic interest rate; i* is the foreign interest rate; e is the

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Economic Catch-up and Technological Leapfrogging

The Path to Development and Macroeconomic Stability in Korea

Keun Lee

This book elaborates upon the dynamic changes to Korean firms and the economy from the perspective of catch-up theory. The central premise of the book is that a latecomer’s sustained catch-up is not possible by simply following the path of the forerunners but by creating a new path or ‘leapfrogging’. In this sense, the idea of catch-up distinguishes itself from traditional views that focus on the role of the market or the state in development.
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Keun Lee

’s given historical, economic, political, and natural conditions and the economic outcomes.1 Obviously, these factors are interrelated and influence each other. The performance of any institution, including the state, which is basically a historical product, depends upon a number of factors including the cultural setting. The acceptable scope of the activities of the state is largely determined by the expectations, which are shaped by culture and tradition, of the rulers and ruled. Markets also operate within a specific context of existing political and cultural

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Keun Lee

aid to post- risis Korea was that it tightens c monetary and fiscal policy and raises short- erm interest rates, the IMF’s t standard prescription for other economies in crisis. The high interest policy was justified as a one to stabilize the exchange rate (by inducing inflows of foreign capital) and, at the same time, to kill heavily indebted or inefficient firms in Korea. Some policy makers in the Korean government opposed this prescription, arguing that it was too harsh for the economy due to the huge adjustment costs that it would trigger. As the exchange rate

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Keun Lee

crawl (BBC) exchange rate system, and relative independence in monetary policy making with a new balance between interest rates and exchange rate targeting. A justification for the intermediate system proposed in this chapter is made because it is not easy to prevent the “two kinds of spreads” from happening simultaneously in a standard ( orthodox) open macroeconomic policy setting. Chapter 7 argues that North Korea can achieve an economic catch- p u after decades of economic isolation and stagnation if it tries a specific type of economic opening (leapfrogging

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Keun Lee

find it more and more difficult and expensive to buy the technologies needed for higher- evel market l shares. In this sense, the two catching- ps are interrelated. Among many u determinants of market competition, such as manufacturing efficiency, marketing, logistics, and so on, technological capabilities are one of the most important elements. At the same time, success in market ompetition c can earn the firm the extra money needed for R&D investment. Our interest in this chapter is in both types of catching- p. Thus, we u start with an examination of the trend of

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Edited by Sören Eriksson

This detailed book explores and provides insights into the development and transformation of various clusters, economies and industrial sectors in East and Southeast Asia.