2002 News Releases

For immediate release:
February 26, 2002

Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org

Dallas Fed Reviews the Role of Entrepreneurship
and Brazil's and South Korea's Financial Crisis Recoveries

DALLAS—The role of entrepreneurs in economic theory, Brazil's turnaround of 1999 and South Korea's recovery from the Asian financial crisisare all examined in the latest issue of Economic and Financial Review, published by the Federal Reserve Bank of Dallas.

In "The Engine of Capitalist Process: Entrepreneurs in Economic Theory," senior economist Robert L. Formaini examines why entrepreneurs are the driving force behind today's market economies. He traces the history of entrepreneurship in economic theory, showing how the concept's popularity has varied greatly since its first use. Formaini seeks to examine the concept's development as one of the key explanatory variables for profit, economic growth and income differentials. Finally, he investigates the policy implications of adopting different views of entrepreneurs.

In "Bank and Currency Crisis Recovery: Brazil's Turnaround of 1999," economists William C. Gruben and John H. Welch write that of the many countries that suffered exchange rate crises in the 1990s, Brazil and Korea recovered most rapidly. The authors analyze the Brazilian recovery, focusing on the freedom Brazilian bank health gave the central bank to pursue a postcrisis monetary policy that would settle markets, reestablish price stability, and encourage investment and the return of foreign capital. They note that Brazilian bank health was not an accident; it reflected not only bank responses to precrisis changes in government regulations, but also to large precrisis interest rate increases associated in part with Brazil’s efforts to defend its currency.

In "Recovery from a Financial Crisis: The Case of South Korea," Dallas Fed economists Jahyeong Koo and Sherry Kiser examine the recovery process of financial crises, particularly in Korea. They argue that the existing framework of financial-crisis theories cannot adequately explain Korea’s rapid recovery and offer an alternative explanation. The writers conclude that the creation of alternative funding sources and labor adjustments played a significant role in containing Korea’s downward spiral.

The fourth-quarter 2001 issue of Economic and Financial Review can be found online at www.dallasfed.org under the Publications heading.