Research On The Measures And The Influence Of Two Financial Crises On Economies Of Korea And Taiwan

Nowadays in the background of regionalization, integration and globalization,individual economy becomes closer and closer with the world economy. Recent yearswith the rapid development of the multinational corporation, especially large financialinstitutions as well as the emerging of financial derivatives accelerate the process ofglobal economic integration. Goods, capital and services flow more quickly to theformation of a large and complex network worldwide. While the rapid development ofthe virtual economy brings the high-quality services to real economy, there ispotential risk. In2007the outbreak of global financial tsunami initiated by the U.S.subprime mortgage crisis reveals the fragility of the financial system, quickly spreadto the world’s major economies, and a impact on the real economy tremendously.Today, the world’s major economies in North America and the European Union arestill in the stage of a slow recovery from the crisis. In order to deal with the crisis,governments have taken measures to deal with the impact of the crisis and stimulateeconomic recovery.This paper focuses on the Taiwan and South Korea, because they are in theproximity of the level of economic development, which are often compared in thestudy, Based on the VAR model to compare the Asian financial crisis and U.S.subprime mortgage crisis experienced by South Korea and Taiwan. The researchreviews of the two financial crises compares them through the reasons andtransmission mechanism and thinks about them deeply, in order to reveal thedifference of going through a crisis and economic development road. Furthermore ittries to put forward a useful reference for the response to the economic crisis. Thus itis extended to a number of emerging market economies to help them make it clear inthe face of the financial crisis in the future, and know how to take effective measuresto avoid causing a serious impact on the domestic economy. At the same time it isclear for them to choose economic development strategy such as industrial policy according to the domestic and foreign environment in different stage.This article through a systematic study of Korea and Taiwan experienced twofinancial crises reaches the following conclusions.First, the reasons for the outbreak of the two financial crises, include: the assetbubble, the inherent weaknesses of the economic growth mode, macroeconomicpolicy mistakes, inadequate supervision of financial capital，etc.Second, in the period of the Asian financial crisis the Korean economy sufferedheavy losses. Under the supervision and guidance of the IMF, Korea reformed thefinancial system deeply, so that the economic development rises again. Taiwan didn’tsuffer a very big blow, but also failed to solve the problems of the financial system.Thus it buried a scourge for undergoing the subprime mortgage crisis.Third, during the U.S. subprime mortgage crisis, Korean economy undergoesless impact than that of Taiwan. in terms of measures, Taiwan makes more specificfiscal policy, and the effect is more pronounced...