Inflation Of South Korea Economics Essay

• The half Southern of the Korean cape is occupied by South Korea in eastern Asia.

• North Korea has bordered to the north, and the ocean of Japan , Eastern ocean to the south and to the east, and the Yellow ocean to the west.

•The area of South Korea has a square kilometers of 98,480 [38,023 square miles], which makes it slightly larger than the state of Indiana.

•The land boundaries of it is 238 kilometers [148 miles] with North Korea and it also has a coastline of 2,413 kilometers [1,499 miles].

•Among of all its significant cities, Seoul, which is the capital of South Korea , and Inchon are located in the northwestern part of the country, while in the South part is Kwangju and Pusan , at the southeast part is Taegu, and Taejon is in the center.

•The government system in South Korea is republic. The chief of state is what you call the President and the Prime minister is the head of government .

•The system of the economy of South Korea is a mixed in which the economy includes a variety of private freedom, combined with centralized economic planning and government regulation.

•South Korea is in accumulation associated of Asian Pacific Economic Cooperation (APEC).

•The estimated sum of population of South Korea was at 47,470,969 in July 2000.

•It increased from 35.3 million in 1975 to 46.1 million in 1998 ,representing a growth speed of 1.2 percent. At the recent expected growth rate of 0.6 percent, the people will add to 51.1 million by 2015. In 2000 the anticipated birth rate was 15.12 per population of 1,000 while the estimated death speed was 5.85 per 1,000 people. The estimated migration rate was 0 percent.

•South Korea’s population is ethnically homogeneous.

•Population in South Korea enlarged to 49.78 Million in December of 2011 as of 49.41 Million in December of 2010, regarding to a description on the loose by the World Bank. Previously, from 1960 until 2011, South Korea people totaled 39.49 Million accomplishing an all time high of 49.78 Million in 2011 of December and a documentation low down of 25.00 Million in December of 1960. The people of South Korea represents 0.72 percent of the worlds sum population which possibly means that one person in every 139 people on the planet is an occupant of South Korea.

•South Korea’s inflation rate has been recorded in September of 2012 at 3 .0 percent .

– In the past, from 1966 until 2012, Inflation Rate of South Korea was averaged 8.1 Percent gaining an all time high of a percent of 32.5 in 1980 of October and a record decreasing of 0.2 percent in February of 1999. Inflation rate is a generic rise in prices measured against a standard level of purchasing power. The most well known that can measure the Inflation are the CPI which measures customer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy. The chart is below which shows historical information for South Korea Inflation Rate.

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The system of the economy of South Korea is a mixed in which the economy includes a variety of private freedom, combined with centralized economic planning and government regulation.

•South Korea is as well member of Asian Pacific Economic Cooperation (APEC).

• South Korea has a mixed economy

• Position 15th in the world by nominal GDP

• 12th by purchasing power parity (PPP),

•It is a glowing industrial state, “high profits”

•South Korea is one of the Asian Tigers

• Is the only developed country up to this moment to have been considered or included in the group of Next Eleven countries.

• From the early 1960s to the current of 1990s, the economy of the South Korea was the fastest in the world.

• South Korea is as well one of the countries in the 2000s, along with  Hong Kong, Singapore, and  Taiwan.

•South Korea is a properly developed country which is considered also the fastest, modified an export-substitution economic strategy to fuel its economy.

•In 2010,South Korea was the  7th largest exporter

And tenth largest importer in the world. 

• The Bank of Korea and  KDV or Korea Development Institute releases major  economic indicators and economic trends of the economy of South Korea periodically. 

Using a personage bank account data from South Korea, where shared

accounts are unusual and the legal system accentuate the individuality of ¬nancial dealings, we observe the allocation of ¬nancial resources between spouses inside households. We ¬nd that every member’s allocate of household savings depends on the balance of bargaining power. We also ¬nd that the wife’s bargain power increases whole domestic investments. The ¬ndings diverge from the unitary reproduction.

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Regardless of the economy of South korea’s high growth potential and structural constancy, South Korea suffers continuous break to its credit rating in the stock market due to the aggressiveness of  North Korea  in times of deep armed forces crisis, which has an undesirable result on the financial markets of the South Korean economy.

Pecuniary organizations such as the World Bank, it describe Korea as one of the fastest-growing major economies of the next generation along with BRIC and Indonesia. South Korea was included as one of the some or few developed countries that was able to avoid a  recession  during the  global financial predicament, and its monetary enlargement price will reach 6.1% in 2010, a sharp convalescence from economic growth charge of 2.3% in 2008 and 0.2% in 2009 when the global financial crisis hit.

Unemployment rate of the country was last reported at 2.9 percent in September of 2012. In the past, from 1999 until 2012, South Korea’s Unemployment price averaged 3.7 Percent accomplishing an all instant elevated of 7.1 Percent in June of 1999 and a confirmation short of 3.0 Percent in September of 2002. The digits of people may also be defined as the unemployment rate actively looking for a job as a percentage of the labor force. Below is the South Korea’s unemployment rate in the past.

Type of Unemployment

Frictionally Unemployment is what happened in South Korea , this actually occurs when a person is out of one job is searching for another . It generally requires some time before person can get the next job.

Cause of Unemployment

The Asian financial depression is the cause of the big spike in unemployment in 1997. Before then, the Korean work market was near full service position, with joblessness operation at less than 3 percent. Huge lay-offs to reduce labor costs followed the crisis. The Korean work market faced a record, increase unemployment rate of 7 percent in 1998 and 6.3 percent in 1999 for the first time since 1960s.

Korea’s middle and extended term growth are critically dependent on the strength of the country’s monetary policy and speed and effectiveness in which structural reforms in the community, monetary and business sectors are carried out. Public sector made changes that are most crucial because its heavy, and often non transparent, government involvement in the financial and corporate sectors usurps market-based controls over the availability and cost of money, foremost to gross economic inefficiencies relative to other free-market countries. Although short-term are hazard for P & G’s mechanized, importing and exporting benefit in Korea have been minimized with the stabilization of the Korean economy following the Asian economic predicament, imprudent economic/financial policies and structural inefficiencies in Korea’s macroeconomic framework  substantially  increase P & G’s business risks.

The tax system of South Korea has a heavily trust on  indirect taxes , which account for about 50 percent of tax revenue. Resident and non-resident single and groups are responsible for taxation. Real-estate rental earnings, business earnings, earned income, temporary property earnings , and miscellaneous earnings attributed to a resident are taxed increasingly . The Interests and dividends are obligated to withholding tax. Non-residents are also going to get from the earnings of the sources in Korea.

Tax rates on individual earnings ranks from 10 percent to 40 percent. Taxation applies to all groups managing in South Korea, whether it’s a domestic or a foreign. Association that have been incorporated in South Korea are considered to be domestic corporations and are responsible for taxation on their worldwide earnings, whereas foreign corporations wage taxes on their South Korean-generated earnings only. The corporate  Earning-tax  rates ranks between 16 percent and 28 percent. Taxes , Duties customs , and other government-generated revenues ( mixed cost, communal safety assistance as well as the earnings of public enterprises) are the main sources of government takings. funds deficits  are financed throughout borrowing, whichever frankly from marital and distant banks or through the issuance of bonds.

South Korea’s central bank, the bank of Korea (BoK), was  established in 1950 under the Bank of Korea Act. In 1998, the BoK announced an inflation target regime and switched its framework from monetary aggregate-oriented operations to an interest rate-oriented. The bank normally scenery an inflation target in consultation with the government and uses the consumer price index (CPI) as the target indicator. For 2010 – 2012, the inflation target of central bank’s is 2.0% to 4.0%. In 2008, the central bank said its new monetary policy framework and changed the policy rate from the call rate to the Bank of Korea Base Rate. In order to accomplish cost constancy, the financial procedure commission, which is composed of seven members, together with the essential stock administrator, the superior assistant administrator and other five members suggested by the ministry and the BOK, presents the pedestal speed every month following considering overall economic presentation, the monetary market and cost rank.

•The interest rate of benchmark in South Korea was last announced at 2.75 percent. In the past , from 1999 until 2012, Interest Rate of South Korea was 3.82 Percent reaching an all time high of 5.25 Percent in 2000 of October and a confirmation short of 2.00 Percent in February of 2009. In South Korea , the interest rates determined are taken away by the Bank of Korea’s (BOK) Monetary Policy Committee. The original interest rate is the Bank of Korea Base Rate which was changed from overnight call rate on March 2008. Below is the chart that shows what is the past data for South Korea Interest Rate. 

South Korea’s money supply grew in August at 0.9 percent from a month earlier due to an increase in money market fund (MMF) and instant deposits, information by the central bank showed Wednesday.

MONETARY UNIT:

• WON [W] is the money of South Korea , which was pegged to the U.S. Dollar. The Ministry of funding was in charge of exchange control. It carried out policy with honor to receipt of currency and system of agreement, foreign substitute operations, costs for no merchandise dealings, and investment dealings and transfers. Other than beyond functions, the Bank of Korea (BOK) also regulated and intervened the operations in the trade market, delegated ability to manage expenditure related to invisibles and certain capital transactions. 

•The exchange rate in South Korea is a free - floating  (a rate determined by supply and demand). This type of changeable  exchange rate  confines the MOFE’s capability to stop or to lessen the negative impacts of sudden changes of exchange rates. In 1997, for example, the MOFE temporarily prohibited South Koreans from purchasing foreign currencies for holding purposes.

•Libyan Dinar – 0.0011

•US Dollars – 0.0009

•British Pounds – 0.0005

•Euro – 0.0006

•United Arab Emirates Dirham – 0.0033

•Tunisian Dinar – 0.0014

•Egyptian Pound – 0.0055

The Gross Domestic Product (GDP) in South Korea was worth 1014.48 billion US dollars in 2010, regarding to a report published by the World Bank. The GDP price of South Korea is approximately correspondent to 1.64 percent of the world financial system. In times gone by, from 1960 unti l 2010, South Korea GDP totaled 277.2 Billion USD getting an all instant elevated of 1049.2 Billion USD in December of 2007 and a verification low of 2.4 Billion USD in December of 1961. The GDP or the gross domestic product measures of national revenue and produce for a given country’s economy. The gross domestic product (GDP) is matched to the whole expenditures for all final goods and services produced within the country in a stipulated period of time.

Energy,Food

There is an increase of electricity prices brought out to the inflation of this month. The government moved to a higher position or level of charges after the state-owned Korea Electric Power Corp. reported a wastage for the first nine months of the year.

Core prices, which exclude energy and food expenses , advanced 3.6 percent in December from a year earlier, estimated with a 3.5 percent rise during November, today’s statement showed. The Bank of Korea kept borrowing costs on hold for a sixth straight month on Dec. 8, the longest pause since it begin in tightening in July 2010. The interest rate of the benchmark was raised three times in this year , recently in June, to 3.25 percent. Yesterday , the Central bank said that its five latest rate increases are estimated to have the effect of lowering expenses rise by 0.5 percentage point each in 2011 and 2012. The inflation of the central bank will mitigate to 3.3 percent next year from 4 percent this year.

Cost-push inflation  happens when the cost of inputs increases. Businesses must gain underdone resources, industry, power, and resources to activate. If the cost of these were to increase , it would decrease the ability of producers to generate output because their unit cost of production had enlarged. If these increases in manufacture cost are comparatively big and persistent, the result is to concurrently produce higher price rises, decrease real GDP, and raise the joblessness rate.

Negative effects

1. No scope for domestic policy

2. Shocks to anchor country propagated to domestic economy

3. Domestic economy must be flexible and similar to anchor country

4. Rate may be sub-optimal

5. CB loses ability to be lender of last resort

6. Can lead to fin stability problems

7. Exit strategy

8. Subject to attacks if not credible

Positive effects

1. Provide a nominal anchor

2. Reduce currency risk component

3. Prevents discretionary policy

4. Simple, clear, transparent: understood by agents thus leading to lower inflation expectations

5. May lead to economic climate where price stability takes important role

6. Useful when markets and instruments not developed

Seoul instituted wide-ranging structural or relating to reforms. Inflation were controlled in South Korea by adopting a tight fiscal measures and conservative monetary policy. Enlarge of the money supply was decreased from the 30 percent level of the 1970s to 15 percent. The budget of Seoul of was froze fort little short of time .Government intercession in the economy was greatly reduced and policies on imports and foreign investment were liberalized to boost competition. To decrease the imbalance between urban and rural sectors, Seoul developed investments in public projects, such communications facilities, and roads while further promoting farm mechanization.