'Unproductive' Credit and the South-Korean Crisis
AbstractWe provide a novel empirical analysis of the South Korean economy that reveals large volumes of excess or 'unproductive' credit since the late 1970s, indicating that a sizeable proportion of total credit was used to refinance unprofitable projects. Our findings are consistent with the hypotheses of 'overlending' and 'overinvestment', which may reflect soft budget constraints and/or moral hazard. We argue that while these weaknesses were not on their own responsible for the financial crisis, their interaction with the risks emanating from capital account liberalisation created fertile ground for financial panic.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 01/2.
Date of creation: Jan 2001
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Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-02-27 (All new papers)
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