ABSTRACT
There are many competing explanations for the Korean economic crisis of 1997. There are stories that blame weakened domestic fundamentals as well as those that seem to blame external factors for Korea’s crisis (such stories as contagion, herding and market manipulation). However, an important point is that even those explanations that emphasize external factors can only be justified when the fundamentals are sufficiently weak. That is, financial crisis does not simply happen just anywhere. Capital outflows in 1997 were responding to real weaknesses in Korea’s corporate sector, weaknesses that had been revealed quite clearly by the bankruptcy of a number of large groups with the onset of the crisis.
