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영어

This study analyses the effects of capital account liberalization on major macroeconomic variables in Korea with a VECM(Vector Error Correction Model). The empirical results found in this study are as follows. Firstly, after capital account liberalization in Korea, the capital inflows and the difference between domestic and foreign interest rates exert the important effects on the process of the determination of Won/Dollar exchange rate. Secondly, the influence of the international interest rate and the real monetary supply over the interest rate in Korea increases after capital account liberalization in Korea. Thirdly, as the capital market is opened, the influence of the real sector falls, but that of capital inflows rises on the determination of the stock price. Finally, the current account in Korea deteriorates as the portfolio investment inflows increase. And the following economic policy lessons can be drawn from the empirical results in this paper. Firstly, Some of the risks associated with capital inflows can be mitigated through the careful sequencing of appropriate polices. In this regard, as macro-economic policies, sterilization policy can be used in the early stages of the inflow period and the fiscal policy can be employed in the long term. And as micro-economic policies, direct controls over capital account or price control policy can be used in the short term to prevent the rapid capital inflow/outflow caused by capital account liberalization. Secondly in order to overcome the adverse macroeconomic effects of capital inflows, several associated policy measures should be taken. And finally, most of all the prerequisite for the successful capital account liberalization is to maintain the stability of the basic economic conditions. As for Korea, therefore, it is key point presently how to maintain the stabilizing level of foreign reserve and to accomplish the tightening fiscal policies.