This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.
Implications: The coronavirus has created an opening for provincial governments to expand its economic policy-making powers. Amid heated debate over measures to mitigate the economic impact of the disease outbreak, the national government is encouraging the issuance of regional currencies. Although a direct transfer of Korean won may be more effective in soothing the sharp economic downturn, provincial governments already have experience with disbursing regional currencies. This furthered the case for allocating part of the national government’s emergency funds towards these localized solutions. As a result, the provincial governments may come out of this crisis with expanded powers to shape the economic environment.
Context: The supply of regional currencies have been steadily growing in South Korea since 2017. Provincial governments issued a total of 3.066 trillion won (~USD 2.5 billion) in 2017, 3.714 trillion won (~USD 3 billion) in 2018, and 22.573 trillion won (~USD 18 billion) in 2019. Before the pandemic, there were plans to issue an additional 3 trillion won worth of regional currency in 2020. According to the Korea Research Institute for Local Administration, regional currency programs have a positive effect on the regional economy, although some experts argue that it is still too early to judge its effects.
Korea View was edited by Yong Kwon with the help of Gordon Henning, Soojin Hwang, Hyungim Jang, and Ingyeong Park.
Picture from Wikimedia Commons