Author(s)

Jangryoul Kim, Gieyoung Lim

Department of International Economics and Law, Hankuk University of Foreign Studies, Seoul, Korea.

This paper reexamines the long run effects of the 1997 Asian crisis on the Korean economy. Using unobserved components models subject to Markov regime-switching, we address two questions:1) whether the output losses of Koreaduring 1997-1998 were permanent or transitory;2) when the trend growth rate decreased. Estimation results suggest that the trend growth rate of the Korean economy has already declined around 1992-1993 prior to the 1997 crisis, and given the transition of the Korean economy into the low-growth regime in the early 90s, the effects of the crisis are mainly transitory.

Permanent and Transitory Components; Markov Regime Switching

Kim, J. and Lim, G. (2012) Legacy of the Asian Currency Crisis: The Case of Korea. Modern Economy, 3, 939-942. doi: 10.4236/me.2012.38118.