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Did the East Asian Crisis Disproportionately Hit Small Businesses in Korea?

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  • I. Domac
  • G. Ferri

Abstract

type="main" xml:lang="en"> The paper demonstrates that Korean small and medium-sized enterprises (SMEs) suffered disproportionately from the crisis and the severe monetary restriction. The descriptive analysis suggests that disruptions in credit markets were particularly pronounced for SMEs. The empirical results underscore that prior movements of the interest rate spreads influence the SMEs' industrial production, while they do not contain any significant information for the overall industrial production. Furthermore, the results from VAR analysis suggest that shocks to the interest rates and to the spreads contribute more to the variance of the SMEs' production than to that of overall production. Consequently, authorities should consider the credit channel effects to avoid ‘overkilling the economy’, and to provide relief to those particular business segments that face greater market imperfections.

Suggested Citation

  • I. Domac & G. Ferri, 1999. "Did the East Asian Crisis Disproportionately Hit Small Businesses in Korea?," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 403-429, November.
    • Handle: RePEc:bla:ecnote:v:28:y:1999:i:3:p:403-429
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    File URL: http://hdl.handle.net/10.1111/1468-0300.00020
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    Cited by:

    1. Richa Chaturvedi & Ashok Karri, 2022. "Entrepreneurship in the Times of Pandemic: Barriers and Strategies," FIIB Business Review, , vol. 11(1), pages 52-66, March.
    2. Celeste Varum & Vera Rocha, 2013. "Employment and SMEs during crises," Small Business Economics, Springer, vol. 40(1), pages 9-25, January.
    3. Giovanni Ferri, 2016. "Regolamentazione bancaria: serve un cambio di approccio," ECONOMIA E DIRITTO DEL TERZIARIO, FrancoAngeli Editore, vol. 2016(3), pages 383-408.
    4. Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander W., 2004. "The credit crunch in East Asia: what can bank excess liquid assets tell us?," Journal of International Money and Finance, Elsevier, vol. 23(1), pages 27-49, February.
    5. World Bank, 2003. "Turkey - Country Economic Memorandum : Towards Macroeconomic Stability and Sustained Growth, Volume 2. Main Report," World Bank Publications - Reports 14704, The World Bank Group.
    6. Boorman, Jack & Lane, Timothy & Schulze-Ghattas, Marianne & Bulir, Ales & Ghosh, Atish R. & Hamann, Javier & Mourmouras, Alex & Phillips, Steven, 2000. "Managing financial crises: the experience in East Asia," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 53(1), pages 1-67, December.
    7. Verónica Mies & Felipe Morandé & Matías Tapia, 2002. "Política Monetaria y Mecanismos de Transmisión: Nuevos Elementos para una Vieja Discusión," Working Papers Central Bank of Chile 181, Central Bank of Chile.
    8. Nawal Abdalla Adam & Ghadah Alarifi, 2021. "Innovation practices for survival of small and medium enterprises (SMEs) in the COVID-19 times: the role of external support," Journal of Innovation and Entrepreneurship, Springer, vol. 10(1), pages 1-22, December.
    9. Trinh, Q. Long & Morgan, Peter J. & Sonobe, Tetsushi, 2020. "Investment behavior of MSMEs during the downturn periods: Empirical evidence from Vietnam," Emerging Markets Review, Elsevier, vol. 45(C).

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