A previous article in this newsletter (issue 3, December 2012) demonstrated how selected Asian governments have come to view science as integral to economic growth, and have consequently taken steps to develop their science infrastructures. This holds most for China, but is also true for Korea, Taiwan and Singapore. The rise of new emerging science powerhouses in Asia provokes the question of what the impact will be on science. In particular, does a shift of scientific power to Asia mean that the flows of scientific talent from east to west will dry up, and are Asian scientific centres new cooperation partners in science for the west? Read more
Bruegel blog
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The implications of Asia’s scientific rise
25th February 2013
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Towards further liberalisation of the capital account in China
22nd February 2013
In China, discussions on capital account liberalisation have recently intensified. The Chinese government plans to gradually liberalise certain capital account items in the areas in which there is sufficient demand from the real economy and areas with relatively low investment risk, while maintaining tight regulation/supervision over the other items of the capital account and the financial sector. In response, Korean financial institutions need to establish strategies that will enable them to take part in this change, especially in the areas expected to undergo capital account liberalisation in the early stage. Read more
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The implications of the weakening Yen*
21st February 2013
The recent trend of the weakening Japanese yen reflects a major policy shift in Japan, following the formation of the government of prime minister Shinzo Abe. While the speed of yen depreciation has been rather fast, the depreciation has not yet even corrected the yen’s appreciation since the global financial crisis erupted. The new inflation target, two percent per year, is not extraordinary. Therefore, the talks about ‘currency wars’ are not justified. The desperate economic situation of Japan warranted a new policy approach, but there are concerns about the effectiveness of the new policy mix. In the coming quarters, both the euro and the Korean won are expected to appreciate, which could increase concerns that the exports of euro-area and Korean companies will be weakened. In particular, it will make it much more difficult for southern European countries to correct their external imbalances. Read more
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Competition policy trends in South Korea
20th February 2013
Economists often talk about a strong correlation between market development and enforcement of competition policy rules. That is not surprising: competition policy aims at removing obstacles to economic activity, such as barriers to market entry, and it encourages new businesses to challenge incumbent players’ market power. Economic theory suggests that this dynamic brings about an increase in total production. It also suggests that the pressure from competition can trigger a ‘Darwinian selection’, so that firms are forced to be as efficient as possible if they want to survive in the market. This generally means lower production costs, higher quality and lower prices paid by consumers. Conversely, in specific circumstances, excessive competitive pressure may reduce incentives to invest (reducing profit expectations); and therefore, slow down the growth pace. Read more
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Real exchange rate adjustments around the globe
10th December 2012
Real effective exchange rate adjustment trends in the aftermath of the global financial and economic crisis were generally not out of line with historical developments, and were in the right direction for a number of major currencies, though with major exceptions. The largely asymmetric impact of the crisis on advanced and emerging countries and their different outlooks call for an exchange rate adjustment between the two groups. Yet neither of the two groups is homogeneous and, in particular, a weakened euro exchange rate toward all trading partners would help to overcome the euro crisis. Read more
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Cooperation between home and host countries on the supervision of multinational banking groups
10th December 2012
With regard to oversight of multinational banks, supervisory authorities in home countries used to play a greater role than those in host countries. However, the recent global financial crises underlined the need for more intervention by host countries. As a host to many multinational banking groups, the Korean government needs to inspect whether there are regulatory loopholes in financial supervision, and to make greater efforts to strengthen global-level cooperation. Read more
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Financial regulatory reforms in the UK and US to manage systemic risks and strengthen consumer protection
10th December 2012
Compared to micro-prudence of financial institutions, ‘systemic stability’ and ‘consumer protection’ are harder to achieve because they are beyond the reach of the ‘invisible hand’ and of individual supervisory authorities. For this reason, it is of utmost importance to clarify who are the responsible parties for financial systemic stability and consumer protection. An independent regulatory committee for each of systemic risk and consumer protection, with strong legal bases, is expected to work most effectively. Read more
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Lessons from the launch of the US Consumer Financial Protection Bureau
10th December 2012
The US government established the Consumer Financial Protection Bureau (CFPB) in 2011 as an independent agency accountable to Congress. Despite political pressures, the CFPB has taken various initiatives to enhance consumer protection in financial services. The case is a useful guide to the Korean government in terms of setting optimal level of roles and obligations in establishing an equivalent institution, while reducing uncertainty for financial firms by providing timely information on regulatory changes. Read more
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The rise of Asia in science
25th October 2012
The shifting geography of scientific output The US has been the world’s largest producer of scientific knowledge for decades, as measured by number of scientific publications in internationally peer reviewed journals[1]. Since 1994, however, EU countries considered as an integrated area, have outperformed the US in terms of number of publications. Now both the US and the EU (as well as Japan) are losing share relative to Asia, and particularly to China (Table 1). The annual average growth rate for Chinese scientific publications from 1995-2009 is 15 percent. China only represented 2 percent of scientific publishing in 1995, but by 2009 accounted for about 9 percent of world scientific output. Although the most spectacular and consistent over time, China is… Read more
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Global financial reform and cross-border integration: Asian leadership needed?
23rd October 2012
Before 2007-08, most global financial reform initiatives were based on a near consensus about the benefits from the free circulation of capital between jurisdictions, and from free cross-border competition between financial services firms. As a consequence of the financial crisis in the US and Europe, however, this near consensus can no longer be taken for granted. One implication is the increasingly tangible possibility of at least a partial fragmentation of the global financial system. There are many indications that this fragmentation is becoming more likely. Rating agencies were unregulated in most of the world outside the US before the crisis (South Korea being one exception), but the G20 recommended they should be regulated and supervised by all major jurisdictions, with… Read more