Feldstein.

• Position: South Korea crisis - Brief Article

Feldstein opened the final session by questioning the wisdom of the IMF and World Bank's drive to reform the economy along multiple dimensions, He asked if they would have done that for any other OECD country. Arguing that there was a need to go back to an older, more narrowly focused approach, he said that the focus should have been on getting the private sector obligations rolled over, paying down the debt and building reserves. The focus also should have been on crisis prevention and management -- but not on long-term growth -- in a country that had been as successful as Korea. Krugman started off his presentation by restating a disagreement that he felt had lurked in the discussion all day: Does the recovery show that the policy response to the crisis was correct? Or, since the economy recovered so quickly, was there a need to have the crisis in the first place? He thinks it is difficult to tell. He also argued that the structural versus liquidity distinction is not very useful. A better distinction is b etween the bursting of a bubble and a bank run. Krugman addressed various other issues ranging from the role of structural reforms in the recovery, to the impact of high interest rates on the exchange rate and the possible advantage that Korea's underdeveloped financial system gave it in organizing private sector creditor involvement in debt restructuring. Uhm argued that there is a need to deal with the vulnerabilities that...