Working Paper: NBER ID: w29299
Authors: Douglas A. Irwin
Abstract: In 1960, South Korea’s exports were about 1 percent of GDP, and the country’s ability to import depended almost entirely on US aid. After changing its foreign exchange and trade policies in the mid-1960s, Korea saw a surge in exports to more than 10 percent of GDP by the end of the decade. What factors account for the shift in policy that enabled this dramatic export growth to occur? The United States helped initiate the process by withholding financial assistance, pressuring Korea to devalue its currency and reform its foreign exchange regime. Initially, the Korean government resisted taking these steps, but in 1964 it became firmly committed to an export promotion strategy to boost foreign exchange earnings and end its dependence on American aid.
Keywords: South Korea; export promotion; economic transformation
JEL Codes: F13; F31; N75
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. foreign assistance (F35) | South Korea's shift towards export promotion (O25) |
| withholding of aid (F35) | South Korea's decision to devalue its currency (F31) |
| withholding of aid (F35) | reform of foreign exchange regime (F31) |
| currency devaluation (F31) | commitment to export promotion strategy (F10) |
| policy reform (E69) | export growth (F43) |
| U.S. pressure (F59) | currency devaluation (F31) |
| U.S. pressure (F59) | policy reform (E69) |
| currency devaluation (F31) | export growth (F43) |