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Aggregate debt efficiency and debt inertia: lessons from the Korean economy

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  • Yong-Yil Choi

Abstract

This paper investigates the link between aggregate debt efficiency and debt inertia in an highly leveraged business sector like Korea's. The model designs the concepts of liquidity multiplier and debt inertia to argue that they are two major indicators of aggregate debt efficiency. The empirical assessment to the Korean business sector indicates that the aggregate debt efficiency depends mainly on externalities of the debt inertia rather than liquidity creation due to the liquidity multiplier. The economic crisis of Korea in 1997 proves that such a debt efficiency structure must be vulnerable to attack.

Suggested Citation

  • Yong-Yil Choi, 2001. "Aggregate debt efficiency and debt inertia: lessons from the Korean economy," Applied Economics, Taylor & Francis Journals, vol. 33(7), pages 923-927.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:7:p:923-927
    DOI: 10.1080/00036840121666
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    1. R. Glenn Hubbard, 1994. "Is There a `Credit Channel' for Monetary Policy?," NBER Working Papers 4977, National Bureau of Economic Research, Inc.
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