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Recent Developments in Korea's Financial Markets: Foreign Exchange Liberalization and the New Real Estate Policy
Author: Park Haesik
Region: Asia
Location: Korea, South
Published May 25, 2011
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In 2005, the Korean government implemented a number of new financial policies. Of those, two policy measures deserve special attention because of their potentially significant impact on domestic financial markets. First, in July, the Korean government launched an overseas investment promotion plan to encourage residents of Korea to invest abroad; this was followed in December by the expiration of sunset clauses on limits to capital account transactions. These two liberalization measures on foreign exchange transactions were considered bold steps taken by Korea’s government because most of the restrictions liberalized by these two measures had been considered the last defense against market opening because of their potential for destabilizing domestic financial markets. Second, in August, a new real estate policy was introduced by the Korean government; its objective was the stabilization of the real estate market. The new real estate policy was the Korean government’s second comprehensive attempt during the postcrisis period to remove speculative real estate trading. The government’s first attempt was in October 2003, and it proved to be unsuccessful in achieving its objective. The purpose of this paper is to investigate the effects of these two policy measures—both put in place in 2005—on Korean financial markets.

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