Global Financial Crisis: Background, Prospects, and Its Impacts on Korea

The global financial system is going through turmoil triggered by the subprime mortgage crisis in the United States. Severe adjustments befell all sorts of financial markets, and financial institutions are very vulnerable to potential shocks from deteriorating economic conditions. This paper briefly recaps the ongoing global financial crisis and its impact it has had on Korean financial markets and economy. It also comments on some issues of crisis management strategies in the short-run, including bailouts and coutercyclical macroeconomic policies. Lastly, from a long-term perspective, it proposes an appropriate policy direction for preventing and managing future crises.