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Do Foreign Bank Operations Provide a Stabilizing Influence in Korea?

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Author Info
Yongil Jeon (Central Michigan University)
Stephen M. Miller (University of Nevada, Las Vegas, and University of Connecticut)
Paul A. Natke (Central Michigan University)

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Abstract

This paper examines Korean data (1994-2001) to determine if foreign banks behave differently than domestic banks and if that behavior provides a stabilizing influence on the Korean banking system and economy. Moreover, this paper also considers the effect, if any, of the Asian financial crisis on foreign and domestic bank behavior. Foreign banks. financial ratios differ from Korean banks with two notable exceptions: provisions for loan losses and loan growth. Before the Asian financial crisis, all banks. loans generally were unresponsive to Korean market conditions. Once the crisis began, foreign banks reduce total lending. Foreign banks increase and Korean banks decrease won-denominated loans when Korean GDP growth increases and when Korean interest rates increase. Finally, foreign banks. lending is sensitive to changes in home-country conditions.

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Publisher Info
Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2004-21.

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Length: 29 pages
Date of creation: Aug 2003
Date of revision:
Publication status: Published in the Quarterly Review of Economics and Finance, February 2006, 82-109.
Handle: RePEc:uct:uconnp:2004-21

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Related research
Keywords: Asian financial crisis; Korean commercial banks; stabilization; foreign bank operations;

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Find related papers by JEL classification:
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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References listed on IDEAS
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.:
  1. B. Gerard Dages & Linda Goldberg & Daniel Kinney, 2000. "Foreign and domestic bank participation in emerging markets: lessons from Mexico and Argentina," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 17-36. [Downloadable!]
    Other versions:
  2. Miller, Merton, 1998. "Asian financial crisis," Japan and the World Economy, Elsevier, vol. 10(3), pages 355-358, July. [Downloadable!] (restricted)
  3. Gilbert, R. Alton & Wilson, Paul W., 1998. "Effects of Deregulation on the Productivity of Korean Banks," Journal of Economics and Business, Elsevier, vol. 50(2), pages 133-155, March. [Downloadable!] (restricted)
  4. Linda S. Goldberg, 2001. "When Is U.S. Bank Lending to Emerging Markets Volatile?," NBER Working Papers 8209, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May. [Downloadable!] (restricted)
  6. Paolo Pesenti & Cedric Tille, 2000. "The economics of currency crises and contagion: an introduction," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 3-16. [Downloadable!]
  7. James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Jennifer S. Crystal & B. Gerard Dages & Linda S. Goldberg, 2002. "Has foreign bank entry led to sounder banks in Latin America?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Jan. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Yongil Jeon & Stephen M. Miller, 2004. "Foreign and Domestic Bank Performances: An Ideal Decomposition of Industry Dynamics," Working papers 2004-46, University of Connecticut, Department of Economics. [Downloadable!]
    Other versions:
  2. Aysan, Ahmet Faruk & Ceyhan, Şanlı Pınar, 2006. "Globalization of Turkey’s Banking Sector: the Determinants of Foreign Bank Penetration in Turkey," MPRA Paper 5489, University Library of Munich, Germany. [Downloadable!]
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