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Working Paper

Effects on the Viet Nam War and the Normalization of the Korean-Japanese Relations on the Korean Economic Development in 1960's (Preliminary)

페이스북
커버이미지
  • 저자 주학중(朱鶴中)
  • 발행일 1972/06/23
  • 시리즈 번호 7201
원문보기
요약 It seems that the economic consequences of the two political
developments in the middle of 1960`s, I. e. , the political
normalization of the Korean-Japanese relations and the korean
involvement in the Viet Nam war, are quiet significant in terms
of their effects on income, employment, growth, capital formation
and balance of payment of the Korean economy during the later
half of 1960`s. Had it not been for such favorable developments
and resulted economic consequences, the Korean economy would
not have achieved the growth rates so high during this period
and consequently some of the goals of the five-year plans.

Based on the use of the open input-output model given with
the final demand matrices, about 1.5% to 4.4% of the growth
rates during the period of 1965-71 could be explained by the
income effects of the two international events. Of course, these
findings are subjects to the assumption and analytical
restrictions of the methods employed in this study.

Economics consequences of the Viet Nam War to Korea
were all favorable in all related aspects. However, there were
both favorable and unfavorable consequences resulting from the
normalization. Japanese capital inflows and investment had
significantly contributed to capital formation during this period.
While the trade relations with Japan further accentuated the
deterioration of Korean balance of payment problem. The major
cause of this deterioration is the gap between the low share of
Japanese export to Korean import. Therefore, the short-cut to
revolve the balance of payment problem constantly haunting th
Korean economy is to achieve the break-even point or at least
to narrow the existing gap between the Japanese import from
and export to Korea.

The induced final demands resulted from the two
international development fueled the fast expansion of the Korean
economy during this period, coupled with the foreign capital
inflow and investment into Korea. Consequently, the Korea
economy has borne the social costs of rapid expansion
manifested in such problem as misallocations of resources,
business contraction, mismanagement, debt service and
repayment and others in recent years. What need to be realized
are the contributing factors to growth others than economic
factors usually dealt in the literature of economic development,
especially in the case of development of geographically small
countries highly sensitive to and dependant of external relations,
like Korea.

Whether or not the magnitudes of economic relations
resulted from these events would sustain in the future is more
of a political question rather than economic. It is probable that
the economic impacts from the Viet Nam War will dwindle
rather rapidly considering the current political environment in the
U. S. It is also evident that the Japanese PAC fund and public
loan amounting to $50 million per year will be terminated by
1975.

Besides, Japanese businessmen are attracted to joint-venture
investment in Korea rather than lending commercial loans in
recent years. And, inspite of the continuing threat of evaluation,
the Japanese government does not seem to move fast enough to
relax the import restrictions imposed on its imports from
developing countries faced by the Korean economy today and to
surmount the difficulties faced by the Korean economy today
and to sustain a rapid rate of growth and fuller employment,
efforts should be made in all possible directions mentioned
above, including the discovery of new "exogenous" factors of
growth.
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