Professor examines challenges to Korean economy

Those monitoring the exchange rate “don’t even have time to go the bathroom” because the exchange rate changes so rapidly, Jun said.

Jun discussed the relationship between the current financial crises in the United States and Korea as well as their similarities to Korea’s financial crisis in the late 1990s.

The lecture, titled “An Introduction to Korean Financial Industry: Challenges and Responses,” was the second in a three-part series on “The New Korean Economy” directed by Un-Chan Chung GS ’78, former president of Seoul National University and a visiting fellow at the Princeton Institute for International and Regional Studies.

Jun, a professor at Hongik University in Seoul, explained that “foreign investors who invest heavily in Korean stocks are selling stocks and leaving the country,” creating a “vicious cycle” in which lack of confidence in the Korean financial market causes people to withdraw money, which then causes the won, Korea’s national currency, to depreciate.

There are, however, internal factors influencing the current economic situation in Korea, Jun said, emphasizing the lack of diversification in financial holding companies, “misbehavior” within financial firms, the lack of coordination among government agencies and the ineffectiveness of the market-sustainability package released by the Korean government last week.

Following the lecture, Hyun Song Shin, a University economics professor, offered comments on Jun’s presentation, and the audience had an opportunity to ask questions during a reception.

Shin compared the current economic situation to the crisis in 1997, when the exchange rate jumped from 800 to 1,600 won to the dollar. Though the currency and current stock prices are weak, like in 1997, there are key differences between the current economy and the economy in 1997, Shin said, noting that banking-sector assets and capital bases are stronger today than they were back then.

“The main thing that I took from [the lecture] is that although there are a lot of similarities to the 1997 crisis, there are a lot of essential differences,” David Lennington GS said at the reception. “While in the 1997 crisis it was more of a corporate issue, now it seems to be more of a household issue.”

Jun stressed the importance of rules and discipline in economics in an interview with The Daily Princetonian.

“In finance, it’s very tempting to describe the borderline between illegal and legal, between bad behavior and sound behavior,” Jun said. “The lesson I want to share with students is that the world is not organized in that way. Even if you have to maintain a keen interest about new innovations, the principal stays the same.”

Yoon Soo Park GS said he appreciated the new perspective that the lecture brought to his understanding of the financial crisis.

“I’m from South Korea. I know personally Professor Chung,” Park said. “The financial turmoil in the U.S. is not a U.S. problem but also an East Asian problem, too, because we are deeply connected one way or another. So this lecture for me gave me an East Asian perspective of this current financial topic.”

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The first lecture in the series, held in late September, discussed “Uncertainty and Sustainable Economic Growth in Korea.” The final lecture is scheduled for Dec. 1.