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

IMF Working Papers, January 1, 2000

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

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Bibliographic details

• Authors: Jong-Wha Lee, Eduardo Borensztein
• Published: January 1, 2000
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451844252.001

Summary and main findings

• This paper analyzes the credit crunch following the recent financial crisis in Korea.
• Using enterprise-level data, the authors find big differences in the magnitude of the credit contraction across different types of firms.
• Chaebol (conglomerate)-affiliated firms appeared to have lost the preferential access to credit they enjoyed in the pre-crisis period.
• Credit appears to have been reallocated in favor of more efficient firms.
• The evidence 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.

Evidence and analytical focus

• Data source: enterprise-level (firm-level) data used to assess heterogeneity in credit contraction across firms.
• Key interpretive point: observed reallocation of credit toward more efficient firms and away from previously privileged chaebol-affiliated firms.
• Alternative explanations considered and contrasted with findings: tight monetary policy and external credit constraints are not identified as primary drivers of the sectoral credit crunch in the authors’ interpretation.

Subject areas and keywords

• Subject: Bank credit, Banking, Credit, Financial crises, Financial institutions, Financial services, Loans, Money, Real interest rates
• Keywords: Bank credit, bank credit variable, Credit, credit allocation, credit contraction, credit crunch, financial crisis, flight to quality, Korea, Loans, overnight rate, profit, profit rate, Real interest rates, short-term debt, tightening credit condition, WP

Content in this bundle

• Financial Crisis and Credit Crunch in Korea: Evidence from Firm-Level Data - WP/00/25
  • Financial Crisis and Credit Crunch in Korea: Evidence from Firm-Level Data - WP/00/25 (Markdown version)
  • Financial Crisis and Credit Crunch in Korea: Evidence from Firm-Level Data - WP/00/25 (PDF)