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Analysis Of Macroeconomics In Korea

2215 words - 9 pages

This essay is aimed to describe the current macroeconomic position of Korea and policy options have been adopted by the monetary and fiscal authorities in order to correct any inflation, unemployment or growth problems that exist. I would like to analyze these by three main aspects. Background of Korea economy, Description of GDP and its recent history and Fiscal and Monetary policies adopted.Background:Korea was an underdeveloped and largely agrarian country before 1960s. However, as a result of success of export-oriented industrialization within about three and a half decades, it was transformed into a modern industrialized country. Its GDP volume soared from only 2.1 billion U.S. dollars in 1961 to 520.0 billion U.S. dollars by 1996. It became a member of the OECD in 1996. Nevertheless, its structural weakness accumulated as the rapid growth of the economy, and this problem finally revealed in 1997. Therefore, Korea economy experienced a currency crisis and some severe difficulties. In order to cure its weakness, currently Korea is carrying on structural reform of its overall economy.GDP and its recent historyGDP constant price (Korea won billion)GDP per capita constant price (Korea won)Real GDP growth (% change)1995377349.8008368256.7148.91996402821.2008844407.6566.81997423006.7009197537.3605.01998394710.5008501231.967-6.71999437709.5009341090.73110.92000478532.90810122431.9249.32001493380.39610348611.3773.12002524689.40810916928.3016.32003537943.56111107422.1252.9Korea is a modern industrialization country, which is mainly based on its export, especially in motor industry and electronic goods. From 1990-1996, it has an average 7.6% GDP growth rate per annum.By study the GDP trend during 1995 to 2003 we can see that the GDP is generally increasing, except in 1998, which declined sharply, because of the financial crisis which started in June 1997. However, the figure goes up again very rapidly in one-year time. It reached 537943.561 billion Korea won in 2003.When we look at the real GDP growth (% change) graph, the dramatic fluctuation of the change of Korea's GDP growth rate can be found easily. From 1995 to 1998, the rate of GDP growth was keep falling and meets the bottom in 1998, which is (-6.7%).This is the first time that the GDP growth rate turned to negative since 1980. In order to pull itself out of the financial crisis, Korea government and central bank were working hard on stabilise its currency, and the effort was very significant, which is shown by the 10.9% positive GDP growth. However, this didn't keep for long, the growth rate declined again in 2000 and even more rapidly in 2001, but went up the next year, followed by another decreases. Therefore, from the fluctuation of GDP growth rate, we can conclude that Korea is still struggling with its economy after the financial crisis. However, a better way of analyse the economy is by study its GDP gap.GDP gap:GDP gap measures the difference between what would have been produced if...

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