Historical Sketch

The partition of the Korean peninsula after the Japanese withdrawal triggered the creation of two Korean states in 1948. The territories south to the 38th parallel became the Republic (commonly referred to as "South Korea"). In 1950, North Korea tried to militarily overcome the partition and to annex the south. The Korean War ended with an armistice agreement in 1953 which restored the pre-war situation. The initially dictatorial system in South Korea gradually liberalized, and the economy has rapidly developed since the 1980s.

Monetary History Overview

The currency of the former Japanese colony continued to circulate in both parts of Korea. In December 1947, the notes of the former Bank of Joseon (Chōsen) were withdrawn in the North while they remained in circulation in the southern part. The Bank of Joseon also remained acting currency institute. During the Korean War, outmoded banknotes were re-issued by North Korea to destabilize the southern economy. In June 1950, the Bank of Korea was established as central bank and the 1st South Korean Won, was created as national currency. Due to the warfare the former notes could not be recalled and exchanged everywhere. They continued to circulate until the next currency reform of 1953. The Won lost more than 90% of its value until the early 1951, as the economy had collapsed due to devastations of the Korean War. After the ceasefire, South Korea carried out another currency reform in February 1953. Two zeros were cut, and the South Korean Hwan became the new national currency. The post-war economic weakness, however, remained and so did inflation. In mid-1962, after another 96% loss in value, one more zero was cut from the Korean currency, and the 2nd South Korean Won became the new unit. Its initial Dollar peg could not be maintained, already two years after its introduction, the Won was devalued by almost 50%, and the exchange rate got floated. In the mid-1970s, the South Korean economy started to boom, and the currency gradually stabilized during the 1980s. This was abruptly ended during the Asian Currency Crisis of 1997, when the Won lost 40% of its value within short time. Part of the loss could be recovered until the early 2000s due to the strength the South Korean economy, and the currency has remained more or less stable since then.

The Republic of Korea joined the International Monetary Fund (IMF) on 26.08.1955.

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