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Financial Crisis and Credit Crunch in Korea; Evidence From Firm-Level Data

  • Jong-Wha Lee
  • Eduardo Borensztein

This paper analyzes the credit crunch following the recent financial crisis in Korea. Using enterprise-level data, we find that there were big differences in the magnitude of the credit contraction across different types of firms. In particular, chaebol (conglomerate)-affiliated firms appeared to have lost the preferential access to credit they enjoyed in the pre-crisis period, and credit appears to have been reallocated in favor of more efficient firms. This suggests that the credit crunch suffered by certain sectors can be attributed to the adjustment by banks and enterprises to the restructuring of the financial sector, rather than to tight monetary policy or an external credit constraint.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/25.

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Length: 28
Date of creation: 01 Jan 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/25
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  1. Anil Kashyap & Jeremy C. Stein, 1993. "Monetary Policy and Bank Lending," NBER Working Papers 4317, National Bureau of Economic Research, Inc.
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  17. Hall, B.J., 1993. "How Has the Basle Accord Affected Bank Portfolios?," Harvard Institute of Economic Research Working Papers 1642, Harvard - Institute of Economic Research.
  18. Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 149-214.
  19. Ferri, Giovanni & Tae Soo Kang, 1999. "The credit channel at work - lessons from the Republic of Korea's financial crisis," Policy Research Working Paper Series 2190, The World Bank.
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