ABSTRACT
This chapter reviews the political and economic environment of Korea in the 1970s that gave rise to the ideas on stabilization policies. It provides the policy-making processes, and focuses on the differences in the perception of economic policies between the two presidents, President Park and President Chun. The chapter discusses the implications of Korea's stabilization policies on developing countries. The primary goal of the stabilization policy was to control chronic inflation, which was a result of monetary expansion. The monetary expansion, stemmed from the accommodative role of the Bank of Korea (BOK) supporting the banking and fiscal sectors that were mobilized for the heavy and chemical industries (HCI) drive. The stabilization policy, therefore, had to begin with the negation of the heavy involvement of the government in the market system, which had been regarded as the backbone of the 'Korean Miracle' for almost two decades.
