Financial Restraints in the South Korean Miracle
AbstractWe provide novel empirical evidence on the effects of financial restraints on South Korean financial development. The evidence is linked to a simple model of the Korean banking system that encapsulates its cartelised nature, which predicts a positive association between financial development and (i) the degree of state control over the banking system, (ii) mild repression of lending rates. The model also predicts that in the presence of lending rate controls, increases in the level of the administered deposit rate are unlikely to influence financial deepening. We test the model empirically by constructing individual and summary measures of financial restraints. Our empirical findings are consistent with our theoretical predictions but contrast sharply with the predictions of earlier literature that postulates that interest rate ceilings and other financial restraints constitute sources of ‘financial repression’.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 00/5.
Date of creation: Sep 2000
Date of revision:
Contact details of provider:
Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC
Other versions of this item:
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-10-05 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diaz-Alejandro, Carlos, 1985. "Good-bye financial repression, hello financial crash," Journal of Development Economics, Elsevier, vol. 19(1-2), pages 1-24.
- Ajit Singh, 1998.
"Financial liberalisation, stockmarkets and economic development,"
Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 8(1), pages 165-182.
- Singh, Ajit, 1997. "Financial Liberalisation, Stockmarkets and Economic Development," Economic Journal, Royal Economic Society, vol. 107(442), pages 771-82, May.
- Singh, Ajit, 1996. "Financial liberalisation,stockmarkets and economic development," MPRA Paper 53897, University Library of Munich, Germany.
- Panicos Demetriades & Kul B. Luintel, 1995.
"The Direct Costs of Financial Repression: Evidence from India,"
Keele Department of Economics Discussion Papers (1995-2001)
95/12, Department of Economics, Keele University.
- Panicos O. Demetriades & Kul B. Luintel, 1997. "The Direct Costs Of Financial Repression: Evidence From India," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 311-320, May.
- Demetriades, Panicos O. & Hussein, Khaled A., 1996.
"Does financial development cause economic growth? Time-series evidence from 16 countries,"
Journal of Development Economics,
Elsevier, vol. 51(2), pages 387-411, December.
- Panicos O. Demetriades & Khaled A.Hussein, 1995. "Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries," Keele Department of Economics Discussion Papers (1995-2001) 95/13, Department of Economics, Keele University.
- Philip Arestis & Panicos Demetriades, 1999. "Financial Liberalization: The Experience of Developing Countries," Eastern Economic Journal, Eastern Economic Association, vol. 25(4), pages 441-457, Fall.
- Fry, Maxwell J., 1980. "Saving, investment, growth and the cost of financial repression," World Development, Elsevier, vol. 8(4), pages 317-327, April.
- Demetriades, Panicos O & Luintel, Kul B, 1996. "Financial Development, Economic Growth and Banker Sector Controls: Evidence from India," Economic Journal, Royal Economic Society, vol. 106(435), pages 359-74, March.
- Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
- Dalla, I. & Khatkhate, D., 1995. "Regulated Deregulation of the Financial System in Korea," World Bank - Discussion Papers 292, World Bank.
- Fry, Maxwell J, 1997. "In Favour of Financial Liberalisation," Economic Journal, Royal Economic Society, vol. 107(442), pages 754-70, May.
- Fry, Maxwell J, 1978. "Money and Capital or Financial Deepening in Economic Development?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(4), pages 464-75, November.
- Amsden, Alice H. & Euh, Yoon-Dae, 1993. "South Korea's 1980s financial reforms: Good-bye financial repression (maybe), hello new institutional restraints," World Development, Elsevier, vol. 21(3), pages 379-390, March.
- Van Wijnbergen, S., 1983. "Interest rate management in LDC's," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 433-452, September.
- Arestis, Philip & Demetriades, Panicos O, 1997.
"Financial Development and Economic Growth: Assessing the Evidence,"
Royal Economic Society, vol. 107(442), pages 783-99, May.
- Panicos O. Demetriades & Philip Arestis, 1996. "Financial Development and Economic Growth: Assessing the Evidence," Keele Department of Economics Discussion Papers (1995-2001) 96/16, Department of Economics, Keele University.
- Sebastian Edwards, 1987.
"Financial Deregulation and Segmented Capital Markets: The Case of Korea,"
UCLA Economics Working Papers
432, UCLA Department of Economics.
- Edwards, Sebastian, 1988. "Financial deregulation and segmented capital markets: The case of Korea," World Development, Elsevier, vol. 16(1), pages 185-194, January.
- Mathieson, Donald J., 1980. "Financial reform and stabilization policy in a developing economy," Journal of Development Economics, Elsevier, vol. 7(3), pages 359-395, September.
- Demetriades, Panicos O & Luintel, Kul B, 1996. "Banking Sector Policies and Financial Development in Nepal," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 355-72, May.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mrs. Alexandra Mazzuoccolo).
If references are entirely missing, you can add them using this form.