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The credit crunch in East Asia : what can bank excess liquid assets tell us ?

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  • Agenor, Pierre-Richard
  • Aizenman, Joshua
  • Hoffmaister, Alexander

Abstract

The authors propose a two-step approach for assessing the extent to which the fall in credit in crisis-stricken East Asian countries was a supply- or demand-induced phenomenon. The first step involves estimating a demand function for excess liquid assets held by commercial banks. The second step involves establishing dynamic projections for the periods after the crisis and assessing whether or not residuals are large enough to be viewed as indicators of an"involuntary"accumulation of excess reserves. The results for Thailand suggest that the contraction in bank lending that accompanied the crisis was the result of supply factors. Thai firms (presumably small and medium-size ones) faced binding constraints in getting access to credit markets after the crisis.

Suggested Citation

  • Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander, 2000. "The credit crunch in East Asia : what can bank excess liquid assets tell us ?," Policy Research Working Paper Series 2483, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2483
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic Theory&Research; Banks&Banking Reform; Environmental Economics&Policies; Financial Intermediation; Settlement of Investment Disputes;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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