Economic Crisis and Financial Reform in Japan and Korea

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University of Missouri-Columbia, 2003 - Financial crises - 756 pages
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Japan and Korea's economic crises after two decades of unprecedented success and subsequent differences in their reform paths have drawn a great deal of scholarly attention. Nonetheless, these studies are devoted to the descriptions of the current problems in Japan and Korea and prescriptions for them, or lean heavily toward economic explanations with politics playing an auxiliary role. Departing from these points of view, this dissertation tried to examine why two countries with similar developmental pattern have taken different paths with the wave of globalization and ensuing economic crises. Based on historical institutionalism and the model of altered states, the study argues that institutional ties among the executives, bureaucracy and business became formidable constraints and political challenges for the political executives in Japan and Korea to reform their problem-ridden economies. In order to effectively implement the study, this dissertation identifies three crucial factors: first, international or domestic events that provide political executives with opportunities for potential transformation; second, political executives that utilize these opportunities for transformation; third, institutional context that allows or limits them to initiate and implement structural reforms. Building on this framework, I argue that the degree of structural reform in a country depends on the political executive's position in their institutional context, which shapes their preferences and goals of the political executives in the decision-making process and constrains their capacity for specific policy outputs. Korean President's position within his structural context strengthened his capacity to act on his preferences. The less-constrained power of the executive in Korea could direct or encourage the bureaucracy to take much bolder steps toward economic reform than in Japan. In the case of Japan, institutional changes prove to be more difficult and tedious than in Korea. The Japanese prime minister became even more constrained to execute financial reform and provide economic transparency following the split of ruling Liberal Democratic Party (LDP) in 1993.

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