This essay surveys the U.S.-ROK bilateral monetary relationship since the Asian Financial Crisis. After describing the institutional changes brought about by the 1998 crisis, including banking sector reform, current account management, and foreign exchange accumulation, this paper explores the implications of the global financial crisis of 2008 on the South Korean economy. This paper contends that the social construction of market confidence, vis-à-vis an announcement of a currency swap with Korea from the United States, helped stabilize the South Korean currency and equity markets. Therefore, the mere announcement of the currency swap, as opposed to its actual implementation, was the source of returned stability in the South Korean economy. Finally, this paper addresses several points of reform to help buttress the South Korean economy from foreign external macroeconomic shock.
“The U.S.-ROK Bilateral Economic Relationship: The 2008 Crisis and Beyond,” is an excerpt from Part III of the 2009 SAIS U.S.-Korea Yearbook.
Neil K. Shenai is a Ph.D. candidate at SAIS studying the political economy of financial crises. Prior to SAIS, he worked at both Morgan Stanley and most recently Citigroup Global Markets. He has written extensively for the Reischauer Center for East Asian Studies and writes bi-monthly for ForeignPolicyDigest.org. He plans to explore the role of norms and ideas in explaining the causes and resolutions of financial crises.