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The Impacts of Bank Loans on Economic Development: An Implication for East Asia from an Equilibrium Contract Theory


  • Shin-ichi Fukuda


In this paper, we first show that middle-term and long-term commercial bank loans were less mobile forms of external liabilities but that a large fraction of external bank debt had been financed by short-term loans in a large number of developing countries. We then present a simple theoretical model where the vulnerable financial structure in developing countries might emerge as a result of efficient monitoring activities by competitive private banks. In the model, we assume both asymmetric information and liquidation risk in the international financial market. The existence of asymmetric information calls for the role of a short-term lender in monitoring borrowers' performance. However, since short-term debt can be a source of liquidity problems, total effects of efficient monitoring on economic welfare might be largely reduced when it increases the possibility of a liquidity shortfall.

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  • Shin-ichi Fukuda, 1999. "The Impacts of Bank Loans on Economic Development: An Implication for East Asia from an Equilibrium Contract Theory," CIRJE F-Series CIRJE-F-58, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:99cf58

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    References listed on IDEAS

    1. Stephen D. Oliner & Glenn D. Rudebusch, 1996. "Is there a broad credit channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
    2. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 33-60.
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    5. Nobuhiro Kiyotaki & Kenneth D. West, 1996. "Business Fixed Investment and the Recent Business Cycle in Japan," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 277-344 National Bureau of Economic Research, Inc.
    6. Yoshikawa, Hiroshi, 1995. "Macroeconomics and the Japanese Economy," OUP Catalogue, Oxford University Press, number 9780198233268.
    7. Hiroshi Yoshikawa, 1993. "Monetary Policy and the Real Economy in Japan," NBER Chapters,in: Japanese Monetary Policy, pages 121-159 National Bureau of Economic Research, Inc.
    8. Gibson, Michael S, 1995. "Can Bank Health Affect Investment? Evidence from Japan," The Journal of Business, University of Chicago Press, vol. 68(3), pages 281-308, July.
    9. Ueda, Kazuo & Yoshikawa, Hiroshi, 1986. "Financial Volatility and the q Theory of Investment," Economica, London School of Economics and Political Science, vol. 53(29), pages 11-27, February.
    10. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 169-215.
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    Cited by:

    1. Shin-ichi Fukuda & Yoshifumi Kon, 2010. "Macroeconomic Impacts of Foreign Exchange Reserve Accumulation: Theory and International Evidence," Working Papers id:3106, eSocialSciences.

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