金融危機后金融安全網(wǎng)韓國案例

TheFinancialSafetyNets

afterthe2021GlobalFinancialCrisis

:KoreanCaseStudy

Young-JaeKimVisitingProfessoratResearchCenterforKoreanStudiesofKyushuUniversityDepartmentofEconomics,PusanNationalUniversityE-mail:,phone:(82-51)510-2539WorkshopattheResearchCenterforKoreanStudiesofKyushuUniversity1Contents1.Introduction2.DescriptionofFinancialStability2.1.ThreeComponentsofFinancialStability2.2.TheCurrentFinancialStabilityMapinKorea3.TheRelationshipbetweenFinancialStabilityandEconomicGrowth3.1.TheSimpleMacroeconomicModel:IS-LMModel3.2.TwoEpisodesinKorea:1997and2021Crisis4.TheCurrentFinancialStabilityandSafetyNetsinKorea4.1.TheOverviewofKoreanFinancialStabilityEnvironments4.2.TheIssuesinKoreanFinancialStability4.3.TheRegionalandKoreanFinancialSafetyNets4.4.TheRecentSurveyofSystemicRiskinKoreanFinancialMarket5.ConcludingRemarksandFurtherResearchAgenda21.Introduction

(BackgroundsandMotivations,purposesandmaincontents)The2021globalfinancialcrisistriggeredbythefinancialsectorsuchasthebankruptcyofLehmanBrothersseverelyaffectedtherealsectorbydevastatingthefinancialsystem.Theimmediateimpacteffectsoftheadverseshockwereveryclearinthestockmarketandforeignexchangemarket:bigfallinthestockpriceandtherapidlydecliningvalueofdomesticcurrencyinmanycountries.3Theturmoilinthefinancialmarketsspreadsoutovertheworldinaglobalizedeconomy,whichinturnshrinkandreducetherealeconomicactivitiessuchasproductionandtradeleadingtothesharpdropintheGDPgrowthrate

inmanycountriessimultaneously.Thischain-likehappeningwasanewphenomenoninadeeplyglobalizedworldsincethemid-1990sandcontinuingglobalizationmakesthefinancialmarketsmorevulnerabletotheunexpectedexternalshocksuchasthesub-primemortgagecrisisin2007structurallyandsystematically.4Thisstructuralandsystematicvulnerabilityisreferredtoassystemicriskinthefinancialsystem,whichisdifferentfromthetraditionalsystematicriskdependingonthesetsofinformation.Inadditiontotheunprecedentedlyhighdegreeofglobalization,theadvancementintheinformationtechnology(IT)hascontributedtomakingthefinancialsystemmorevulnerabletotheshockinspiteofgreatbenefitsofIT-basedfinancialmarkets.5Isglobalizationgreat?byStephenCecchetti,BISPapers69,2021Theremaybeanoptimalleveloffinancialglobalization:Sinceacertainleveloffinancialglobalization,thelaborproductivitystartstodecline.6Theremaybeanegativerelationshipbetweenproductivitygrowthandthegrowthinthefinancialsector.Hisconclusionisthatfinancialglobalizationisgreatmostofthetimebutnotalways.7Theon-goingeuro-zonedeficitcrisisissocomplicatedinthefollowingreason;itiscloselyrelatedandconnectedbetweencountriesofeuro-zoneandoutofeuro-zone,andbetweensectorssuchasprivatefinancialmarkets,publicfinancialsector(governmentbudget)andcentralbanks.Duetothenatureofcomplicationandconnectedness,theeuro-zonedeficitcrisisisstillintheprocessoffurtherdevelopmentsandnotyetresolveddespiteeverlastingendeavorsoftheassociatedcountriesandinternationalinstitutionssuchasIMFandWorldBank.8Thus,thispaperdescribesthecurrentfeaturesoffinancialstabilityandemphasizesitsimportanceintermsofpreventingthefutureexpectedfinancialcrisisandtherecoveryofdepressedrealeconomy.Itisverysignificanttosecurethefinancialstabilityforstableandsustainableeconomicgrowththroughthefavorableintermediaryfunctionoffinancialinstitutionsandwell-behavedfinancialmarkets.Forfurtherunderstanding,wespecifytherecentdevelopmentsofsecuringfinancialstabilityinKoreaandsomeepisodesduringtheperiodof2021-2021,namedKIKOevent.92.DescriptionsofFinancialStability

2.1.ThreeComponentsofFinancialStabilityFinancialstabilityisreferredtoasthesituationwherefinancialsystemisgenerallystable,whichimpliesthatthreecomponentsoffinancialsystemsuchasfinancialinstitutions,financialmarketsandfinancialinfrastructureareallstableindicatingallarefineandwell-behaving.Forthestabilityoffinancialinstitutions,thebasicfinancialintermediationshouldbewellperformedwithoutanybarriersindicatingwell-functioningmechanismofconnectingdemandersforfundandsuppliersoffund.10Thus,theinstabilityoffinancialinstitutionsmayoccurwhenthefinancialinstitutionscouldnotperformthedesignatedfinancialintermediationwithouttheassistanceofgovernmentandcentralbankasweobservedduringthe1997-98Asianforeignexchangecrisisandduringthe2021globalfinancialcrisis.Similarly,thestabilityoffinancialmarketsstatesthatallmarketparticipantssuchasindividualhouseholds,firms,financialinstitutionsandthegovernmentcanmakefinancialtransactionswithcredibilityfortheirowneconomicpurposesintheformsoflendingandborrowinginthemarkets.11Thestabilityoffinancialinfrastructureissecuredwhenasetoforganizationsandinstitutionsassociatedwithfinancialstabilityarewellpreparedandperformed,whichenablesfinancialintermediariesandfirmstopreventpossiblefinancialcrisis,andbothprudentialmonitoringandmarketdisciplineofsupervisoryauthorityequippedwitheffectivefinancialsafetynetsandsettlementsystemarefunctioningwell.12Morespecifically,corporategovernance,marketdiscipline,andfinancialregulationandsupervisionarethemaincategoriesinthestabilityoffinancialinstitutions:OnerepresentativeexampleofprudentialregulationisBIScapitaladequacyratioandtheinsurancesystemforthedepositorsisagoodexampleofsafetynet,andotherssuchasthecentralbankasalastlenderandthestablesettlementsystem.Thefinancialstabilityisobtainedwhenthethreecomponentsoffinancialsystemareallinstablestateindicatingeachindividualcomponentiswell-functioningandinter-connected.132.DescriptionsofFinancialStability

2.2.TheCurrentFinancialStabilityMapinKoreaThefinancialsystemhasgenerallymaintainedstability,butthreesectorssuchasbanks,domesticandglobaleconomies,anddebtservicingcapacityofbusinesssectorshaveworsenedduetotheexistingeuro-zonecrisisandeconomicslowdownathomeandabroad.143.TheRelationshipbetweenFinancialStabilityandEconomicGrowth

3.1.TheSimpleMacroeconomicModel:IS-LMModelTheIS-LMmodelrepresentstheequilibriuminbothgoodsmarketandfinancialmarket,whichalsoimpliesthatthetwomarketsarecloselyinterdependent.15TheGrowthRateoftheFourthQuarterof2021Koreawasoneofthecountriesthatweremostseverelyhitbytheglobalshockduringthefourthquarterof2021.Figure1:(Quarter-to-Quarter)GrowthRatesoftheFourthQuarterof20213.TheRelationshipbetweenFinancialStabilityandEconomicGrowth

3.2.TwoEpisodesinKorea:1997and2021Crisis16TheStockPricesandtheWon/DollarExchangeRateFromthesecondhalfofSeptember2021,stockpricescollapsedandthewon/dollarexchangeratesoared.Figure2:StockPricesandtheWon/DollarExchangeRate17Korea'sExportGrowthRateTherateofcontractioninexportswastrulyshockingduringthefourthquarterof2021.Theyear-on-year(month-to-month)growthrateofexportscollapsedfrom27.6%(-3.1%)inSeptemberto7.8%(-2.6%)inOctoberandfurtherto-19.5%(-22.2%)inNovember.Figure3:ExportGrowthRate18FactorsfortheCollapseintheFourthQuarterof2021

Korea'sHighDependenceonTradeSectorFigure4:GrowthRatesinthe4thQuarterof2021&theShareofManufacturing19FactorsfortheCollapseintheFourthQuarterof2021TheCollapseofChineseEconomyFigure5:GrowthRatesofExportandImport,andTradeBalanceofthePeople’sRepublicofChina20FactorsfortheCollapseintheFourthQuarterof2021MassiveCapitalWithdrawalfromKoreaFigure6:Short-TermForeignDebtRelativetoGDPorForeignReserve21ComparisonwiththeCurrencyCrisisPeriod

MajorMacroeconomicIndicators:Similaritiesanddifferences(GDPandREER)Figure7:SimilaritiesoftheCurrentRecessionwiththeCurrencyCrisisPeriod22ComparisonwiththeCurrencyCrisisPeriodMajorMacroeconomicIndicators:SimilaritiesanddifferencesFigure8:DifferencesoftheCurrentRecessionfromtheCurrencyCrisisPeriod23ComparisonwiththeCurrencyCrisisPeriod

MajorMacroeconomicIndicators:SimilaritiesanddifferencesFigure9:EmploymentinRelationtoPrivateConsumptionandExport24ComparisonwiththeCurrencyCrisisPeriodMajorMacroeconomicIndicators:SimilaritiesanddifferencesFigure10:EmploymentGrowth,CurrentRecessionandCurrencyCrisisPeriod25ComparisonwiththeCurrencyCrisisPeriodStructuralPositionsoftheEconomywhentheShockOccurredFigure11:Debt-equityRatioandProfitabilityoftheCorporateSector26ComparisonwiththeCurrencyCrisisPeriodStructuralPositionsoftheEconomywhentheShockOccurredFigure12:BISRatioandProfitabilityoftheBankingSector27ComparisonwiththeCurrencyCrisisPeriodStructuralPositionsoftheEconomywhentheShockOccurredFigure13:ForeignReservesRelativetoGDPorShort-TermDebt284.TheCurrentFinancialStabilityandSafetyNetsinKorea

4.1.TheOverviewofKoreanFinancialStabilityEnvironments

Intheworldeconomy,thedownsideriskstogrowthareincreasing,whichaffectsthefinancialstabilityofbothglobalandlocalduetothereasonswespecifiedbefore.29

Growthratesofleadingemergingmarketcountriesaresignificantlyfalling,especiallyBrazil.30

ThereisapossibilityofSpanishfiscalsoundnessworseningfurther,dueforinstancetocontinuationoftheeconomicrecessionandtoanincreaseinbanks'badloan,withnegativeeffectonItaly-withitsvulnerableeconomicfundamentals.31

IntheKoreaneconomy,thegrowthmomentumisweakeningduetosimultaneousslumpsinexportsanddomesticdemands(privateconsumption,investmentandgovernmentexpenditure):Korea'sheavydependenceontheglobaleconomy32Householddebtgrowthrateshowedjust1.1%inthefirsthalfof2021,thelowestsincethecreditcardcrisisin2003.33

Therelationshipbetweenhouseholdsavingsandpotentialgrowthrateisapparentlypositive,whichmeanspotentialgrowthratesriseashouseholdsavingsincreasein21OECDnations.34<FinancialSystemStabilityAssessment>

Inbankingsector,assetsoundnesshasworsenedsomewhat,fundingstructurestabilityhasbeenenhanced.35

TheKoreanfinancialmarketsshowquitevolatilemovementsexceptforeignexchangemarket.36Quitesoundforeignexchangereservesandnetexternalassets374.TheCurrentFinancialStabilityandSafetyNetsinKorea

4.2.TwoIssuesinKoreanFinancialStability1)TheHouseholdDebtProblemSlowdowninHouseholdDebtIncreaseHouseholddebt(basedonhouseholdcredit)stoodat922trillionwonasofJune2021,amere1.1%increasecomparedtotheendof2021(912trillionwon)AsofJune2021,thehouseholddebt-to-disposableincomerationwasestimatedtostandat134%,havingincheddownwardabout1%pointcomparedtotheendof2021(135%)38-Thehouseholddebtbuiltupsincethemid-2000scanactasasubstantialfactorburdeningthemacroeconomyincludinggrowth:Intheshortrun,privateconsumptionmayfallwiththeincreaseindebtserviceburden,inthemedium-tolongrun,theeconomy'sgrowthpotentialmaybeweakenedbythelimitedaccumulationofproductivecapitalthroughthepoordomesticeconomicfundamentalsandreducedhouseholdsavings.39RisingDefaultRiskofSelf-employedamidEconomicSlump

Theself-employedbusinessowners'defaultrisksappeartohavebeenrisingwiththeircontinuingincreaseindebtandvulnerabledebtstructure.40Shareofself-employedandlaborproductivityintraditionalservices

TheproductivityinthetraditionalservicesectorsinKorea,suchaswholesaleandretailservices,andfoodandaccommodationservices,inwhichaboutone-halfofself-employedwork,isthelowestamongOECDcountriesexceptHungary.41Rateofrealincomegrowthoftheself-employedandpaidworkers:Sharpcontrastbetweencrisisperiodsandnormalperiods

Ifthedomesticeconomicslumpscontinuesintothefuture,therewilllikelybeasharpdecreaseintherepaymentcapacityofself-employedbusinessownersduetothesignificantcontrastofrateofrealincomegrowthbetweenself-employedandpaidworkersduringthecrisisperiods.422)TheKIKOProblem:2021–2021KIKO(Knock-In,Knock-Out):Afinancialderivativecomposedofcalloptionandputoptiontohedgethedecliningwon/dollarexchangerate.○Calloption:Arighttobuytheunderlyingassetatagivenpriceinthespecifiedpointoftime.○Putoption:Arighttoselltheunderlyingassetatagivenpriceinthespecifiedpointoftime.43Since2002through2007,thewon/dollarexchangeratecontinuestofall,whichmeanstheexportingfirmsmayloosetherevenuewhenthedollarhasbeenconvertedtothewon.Underthesesituations,thesmallandmediumsizedfirmsneedtohedgetheexpectedlosscausedbythefallingwon/dollarexchangerate(depreciationofdollaragainstKoreanwon):AsvalueofU$declines,theexportingfirm'srevenueintermsofKoreanwonfalls.44TheProfitsStructureofKIKO45possiblecases

won/dollar<900:KOarea,contractisexpired.900<won/dollar<940:Putoptionisexercisedbyfirmssothatfirmsgetprofits.940<won/dollar<960:Notransactionswon/dollar>960:Calloptionisexercisedbybankssothatthefirmsshouldselltheagreedamountofdollaratalowerpricethanthemarketprice.Inthiscase,thefirmsloseandbanksgain.?Manyfirmsarefinanciallyintrouble;bankruptcy

?Leadtofinancialinstability(NeedfinancialsafetynetstoavoidKIKO)461)EuropeanSafetyNetTobinTax:Impositionoftaxoninternationalfinancialtransactions,0.1%onstockandbonds,0.01%onfinancialderivativessuchasfuturesandoptions.Positiveeffect:Tostabilizetheforeignexchangemarketthroughavoidingsuddenoutflowandinflowofforeigncapital,whichreducesthevolatilityofpricevariablesandhelptosecurefinancialstability.Negativeeffect:Toshrinkthetransactionsofforeignexchangemarketwhichleadstodistortionsofdomesticandinternationalcapitalmarkets,andtheeconomicgrowthwillbereduced.4.TheCurrentFinancialStabilityandSafetyNetsinKorea

4.3.TheRegionalandKoreanFinancialSafetyNets47FiscalIntegration:Toreachthefiscalintegration,fiscalunionissetforthefirststep,fiscalintegrationissetforthenextstep.FiscalUnion:Tosetthetargetoffiscaldeficits.monitoringandsupervisiononfiscalpolicyofmembercountries.FiscalIntegration:ToestablishasingleministryoffinanceforIntegratedBudgetSystem,integratedgovernmentdebt,policycoordinationandfiscaltransfer.482)AsianSafetyNetCMI(ChiangMaiInitiative):BilateralcurrencyswapamongASEAN+3(Korea,Japan,China),effectiveasofMay2005.CMIM(ChiangMaiInitiativeMultilateral):UpgradedCMIfrombilateraltomultilateralbasedonthegivenproportionofobligation,effectiveasofOct.2021.ABMI(AsiaBondMarketInitiative):DevelopingAsiabondmarketforcirculatingthefundsinthecorrespondingregionbyissuingthebondswithlocalcurrency,inprogress493)KoreanSafetyNetsTaxonForeignExchangeTransaction:ApplyTobinTaxtotheforeignexchangemarketonlytoavoidseverevolatilityofforeignexchangeratesothermacroprudentialpolicyReduceforwardforeignexchangepositionTaxonBondtransactionsTaxonforeigncurrency'sborrowingLongTermPerspective:ForeignExchangeStabilizationMechanismisproposedtoavoidanotherKIKOcrisisinthefuture.504.TheCurrentFinancialStabilityandSafetyNetsinKorea

4.4.TheRecentSurveyofSystemicRiskinKoreanFinancialMarket

Duringthe2021crisis,thevaluesofindexesweresohigh,butthoseareprettystableafterthecrisis.51Comprehensive,complementaryandinternationally-coordinatedpolicyshouldbedevelopedandpursuedtosecureandmaintainthefinancialstabilityinthefollowingfourperspectives.5.ConcludingRemarksa