Front Matter Page
© 2002 International Monetary Fund
February 2002
IMF country Report No. 02/20
Republic of Korea: Selected Issues
This Selected Issues paper on the Republic of Korea was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on January 24, 2002. The views expressed in this document are those of the staff team and do not necessary reflect the views of the government of the Republic of Korea or the Executive Board of the IMF.
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Front Matter Page
INTERNATIONAL MONETARY FUND
REPUBLIC OF KOREA
Selected Issues
Prepared by Anthony Richards, Keneeth Kang, Henry Ma, Hong Liang, and Aung Win (all APD), Paul Cashin (RES), Meral Karasulu (MAE), Thomas Laryea (LEG), and Sungbin Cho (Summer Intern, APD)
Approved by the Asia and Pacific Department
January 24, 2002
Contents
I. Features of Korean Business and Export Cycles
A. Introduction
B. Data
C. Dating Business Cycles Using Bry-Boschan Methods
D. Conclusion
References
Appendix
Figures
I.1. Industrial Production, Korea
I.2. Industrial Production, Japan
I.3. Industrial Production, United States
I.4. Real Korean Exports to the World
I.5. Real Korean Exports to Europe
I.6. Real Korean Exports to the United States
I.7. Real Korean Exports to Japan
Tables
I.1. Business Cycle Dates and Durations of Booms and Slumps in Korea Industrial Production and Real World Exports, 1960–2001
I.2. Descriptive Statistics of Business Cycle and Export Cycles, 1960–2001
I.3. Descriptive Statistics of Contractions and Expansions in Korean, Japanese and United States Industrial Production and Korean Real Exports, 1960–2001
I.4. Correlation Statistics, First Differences, 1961–2001
I.5. Correlation Statistics, First Differences, 1990–2001
I.6. Concordance Statistics, 1960–2001
I.7. Concordance Statistics, 1990–2001
II. Labor Market Developments in Korea Since the Crisis
A. Introduction
B. Immediate Impact of the Crisis and Policy Responses
C. Labor Market Adjustments Since the Crisis
D. Remaining Issues
References
Appendix
Figures
II.1. Unemployment Rate
II.2. Labor Force Participation Rate
II.3. Earnings Growth
II.4. Unemployment Rate
II.5. Employment
II.6. Employment by Type of Worker
II.7. Nonregular Employment
II.8. Growth of Hours Worked by Type
II.9. Employment by Productive Sector
II.10. Average Earnings by Productive Sector
II.11. Labor Productivity and Unit Labor Cost
III. Changes in the Structure of Financing in Korea
A. Introduction
B. Overall Developments
C. Households
D. Businesses
E. Conclusion
References
Text Boxes
III.1. The Flow of Funds: Key Concepts
Figures
III.1. Economy-wide Stocks of Financial Assets
III.2. Selected Financial Instruments
III.3. Sectoral Holdings of all Financial Assets
III.4. Korean Households’ Net Worth
III.5. Korean Households’ Financial Assets
III.6. Cross-country Comparison of Households Financial Assets
III.7. Cross-country Comparison of Sectoral Holdings of Stocks
III.8. Korean Households’ Sources of External Finance
III.9. Korean Businesses’ Sources of Financing
III.10. Korean Businesses’ Sources of External Finance
III.11. Korean Businesses’ Sources of Loans
III.12. Korean Businesses’ Sources of Foreign Financing
III.13. Cross-country Comparison of Sources of Business Financing
Appendix Tables
III.1. Distribution of Types of Financial Assets
III.2. Distribution of Selected Financial Assets, by Type of Holder
III.3. Distribution of Selected Financial Liabilities, by Type of Holder
III.4. Households’ Financial Assets and Liabilities (in percent of disposable income).
III.5. Households’ Financial Assets and Liabilities (in percent of totals)
III.6. Financial Liabilities of Businesses
III.7. Asset Accumulation of Businesses
III.8. Sources of Financing for Businesses
IV. Linkages Between Domestic and International Asset Markets: The Korean Case
A. Introduction
B. The Korean Equity Market: Structure and Recent Trends
C. The Korean Equity Market—Statistical Analysis
D. The Role of Foreign Investors in the Equity Market
E. The Currency Market
F. External Debt
G. Conclusion
References
Figures
IV.1. Foreign Investment in the Korea Stock Exchange
IV.2. Korean Stock Prices
IV.3. Spreads on Korean and Other BBB-rated Countries
Tables
IV.1. Price Earnings Ratios
IV.2. Regressions of Korean Returns on Regional and U.S. Returns
IV.3. What Drives Net Purchases?
IV.4. Foreign Exchange Turnover
V. Firm Level Analysis of the Korean Corporate Sector: 1996–2000
A. Introduction
B. Data
C. Corporate Performance During 1996–2000
D. The Chaebol Factor
E. Regression Analysis
F. Conclusion
References
Figures
V.1. Debt-Equity Ratios, Chaebol vs. Non-Chaebol
V.2. Share of Short-term Debt in Total, Chaebol vs. Non-Chaebol
V.3. Distribution of ROS
V.4. Return on Sales (ROS), Chaebol vs. Non-Chaebol
V.5. Tobin’s Q—Ratio of Market Value to Book Value Chaebol vs. Non-Chaebol
Tables
V.1. Leverage and Debt Structure, 1996–2000
V.2. Liquidity-Current Ratios, 1996–2000
V.3. Indicators of Profitability, 1996–2000
V.4. Indicators of Financial Costs, 1996–2000
V.5. Turnover and Productivity, 1996–2000
V.6. Comparison of Chaebol vs. Non-Chaebol
V.7. Regression Results—Determinants of Profitability, 1996–2000
V.8. Regression Results Market Value to Book Value, 1996–2000
VI. Bank Privatization in Korea: Developments and Strategies
A. Introduction
B. Emerging Structure of Korean Banking Sector
C. Privatization Efforts in 1999–2001
D. Remaining Challenges in Bank Privatization
E. Conclusion
References
Text Boxes
VI.1. Use of Public Funds and Recovery Prospects
VI.2. Privatization Methods
VI.3. Bank Ownership Limits in Korea
Figures
VI.1. Two-tier Structure in Commercial Banking (end-March 2001)
Tables
VI.1. Change in Ownership in the Banking Sector
VI.2. Concentration in Commercial Banking
VII. Reform of Korean Insolvency Laws: A Review of Key Issues
A. Introduction
B. Principal Elements of Effective Insolvency Law Reform
C. Conclusion