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An Open Economy Model of the Credit Channel Applied to Four Asian Economies

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  • Spiros Bougheasa
  • Paul Mizena
  • Cihan Yalcina

Abstract

This paper provides a theoretical model of an open economy credit channel including currency mismatch and financial fragility where exporting firms have access to international credit but non-exporting firms do not. It considers the post-crisis outcome which is predicted to be dramatically different for exporters/non-exporters. We examine firms’ access to external finance in four Asian economies after 1997 using a large panel of balance sheet data. Our paper demonstrates that firm heterogeneity is critical to understanding the open economy credit channel effects post-crisis since smaller and less profitable firms are indeed less likely to obtain credit than larger, export-oriented firms.

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Paper provided by University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) in its series Discussion Papers with number 07/09.

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Handle: RePEc:not:notcfc:07/09

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Keywords: Credit Channel; External Finance; Asian Crisis.;

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