Identity Evolution, Stigma Management And International Capital Regulation: Korean Capital Account Policy Research

The core of this thesis is how the nation identity and norm change will shape a nation’s choice in capital account policies. During the two financial crisises in1997-1998 and 2008-2012, the norm of free flow in international capital is against the national interest of South Korea. In 1997-1998, South Korea chose to follow the norm of international capital flow and sped up the policy of opening capital account, but in2008, after the breakout of global financial crisis, it went against the norm of international account and used the policy of temporary restriction in capital free flow.What made South Korea accept international capital norm and speed up opening account policies and why did it go against the norm and carried out the policy of capital control and began to shape international capital norm?Since 1970 s, with the faster flow of international capital, developed countries and new market economic bodies gradually implemented opening capital account policies. The industry of international economy and IPE have four kinds of theories in choosing capital account policies. Cost and benefit theories in capital account policy,international capital structure hypothesis, domestic political theory and norm diffusion theory. The four theories have provided explanations for national capital account policies from four aspects: rational choice, system structure, domestic structure, and norm structure. However, for the two choice made by South Korea, the four theories can hardly made a satisfactory explanation.In order to remedy the limits of the four theories, the thesis has explained why South Korea made two different choices in account policies from the aspect of stigma management. In the world economic system, nations have shaped three identities based on their understanding of the relationship of “center-periphery”,“nation-market”, which are nationalism nation identity, state nation identity, and liberalism nation identity. Influenced by the common sense and knowledge structures,the national identity is under constant change and evolution. The national identity is not only limited and shaped by proper norms, it is also restricted by stigma.When the interest of a nation is against international norms, the choice of anation may cause stigma. Countries have three strategies to deal with stigma management, which are stigma recognition, stigma rejection and counter-sigmatization.When an country is in the stage of identity evolution, it has a strong desire for national identity, and wishes to shape free international capital norm, therefore its national interest may change with it. Therefore, the country may choose to accept the stigma and follow international norm and implement the open account policies.When a country acquires the liberalism national identity, it may go against the norm of international account policies for its own national interests. If the international norm has very strong restrictions, the countries may, in order to reduce the losses caused by stigma, use proper discourse to manipulate domestic and international financial market and lead market to generate positive anticipations to its national economy.When a country has acquired the liberalism national identity, and at the same time, the international norm is in the stage of degeneration, it may set up discourse frame, discourse connection and such strategies to shape new norm in international financial governance mechanisms in order to legalize its own actions and policies.