In 1945, as World War II came to an end, Korea was liberated from Japanese colonial rule and the Korean peninsula was divided into two along the 38th parallel. The country was in chaos. The Korean War broke out in 1950 and ended in 1953. During the 1950s, the economy’s performance was poorer than it had been in 1940 and inflation was rampant. In the second half of the 1950s, foreign trade was minimal; annual exports were around 20 million current dollars, and annual imports roughly 360 million dollars, most of which was financed by foreign aid. Inevitably, the foreign exchange shortage was severe. Economic policies were in disarray. On the one hand, the Korean government’s industrialization strategy was basically import substitution under protection; on the other, it tried to keep the official exchange rate as low as possible, while keeping foreign exchange transactions under strict control. The consequence was a virtually closed economy and the proliferation of multiple exchange rates throughout the 1950s and early 1960s.