Front Matter

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© 2004 International Monetary Fund

February 2004

IMF Country Report No. 04/45

Republic of Korea: Selected Issues

This Selected Issues paper for 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 February 3, 2004. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of the Republic of Korea or the Executive Board of the IMF.

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Selected Issues

Prepared by Craig Beaumont, Paul Gruenwald, Dong He, Thierry Tressel, and Harm Zebregs

Approved by Asia and Pacific Department

February 3, 2004


  • I. Fiscal Policy in the Korean Business Cycle

    • A. Introduction

    • B. Main Characteristics of Fiscal Policy During 1970–2002

    • C. The Impact of Fiscal Policy Shocks on GDP

    • D. Conclusion

    • References

  • Tables

  • I.1 Variance Decomposition of Real GDP, in percent

  • Figures

  • I.1 Fiscal Indicators

  • I.2 Tax Revenue

  • I.3 Output Gap and Fiscal Impulse

  • I.4 Correlation Between Output Gap and Fiscal Impulse

  • I.5 Responses to Public Spending Shock

  • I.6 Responses to Tax Revenue Shock

  • I.7 Responses to Public Spending Shock

  • I.8 Responses of GDP Components to Public Expenditure and Tax Shocks

  • I.9 Responses of Public Spending and Tax Revenue to GDP Shock

  • II. The Phillips Curve and Okun’s Law—Do They Work in Korea?

    • A. Introduction

    • B. Theory and Empirical Specification

    • C. Properties of the Estimated Equations

    • D. Asymmetry and Monetary Policy Formulation

    • E. Forecasting Performance

    • F. Current Model Projections

    • G. Conclusion

    • References

    • Annex: Phillips Curve and Okun’s Law Estimates

  • III. A Family Divided—Labor Market Duality in Korea

    • A. Introduction

    • B. Labor Market Structure and Institutions

    • C. The Causes and Consequences of Labor Market Duality

    • D. The Government’s Reform Proposals

    • E. Lessons from International Experience

    • F. Concluding Remarks

    • References

  • Boxes

  • III. 1 Labor Market Duality in Korea: How Big a Concern?

  • III. 2 The 1997 Spanish Labor Market Reform

  • IV. Taking Stock of Nonbank Financial Sector Restructuring in Korea

    • A. Introduction

    • B. The Nonbank Financial Sector Post-Crisis

    • C. Progress to Date in Nonbank Restructuring

    • D. Why Was Nonbank Reform Delayed and What Have Been The Consequences?

    • E. Assessment and the Remaining Agenda

    • References

  • Boxes

  • IV.1 Nonbank Financial Institutions in Korea: Functional Descriptions

  • Tables

  • IV.1 Assets of Financial Institutions

  • IV.2 Use of Public Funds for Financial Sector Restructuring

  • IV.3 Number of Financial Institutions in Korea

  • IV.4 Employment in the Financial Sector

  • IV.5 Impaired Assets of Major Financial Subsectors

  • IV.6. Impaired Assets of Nonbank Lending Institutions

Republic of Korea: Selected Issues
Author: International Monetary Fund