Korea's Economy
From the Issue
Korea's Economy Volume 22About Korea's Economy
Korea’s Economy is KEI’s annual journal publication dedicated to the key issues of the day for the Korean economy. Articles in Korea’s Economy are designed to give the casual, but informed reader insight into issues related to Korea’s markets and financial institutions, economic reform, economic relations with the wider world, and North Korea. It is published jointly each year with the Korea Institute for International Economic Policy.
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.