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

January 1, 2000

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Jong-Wha Lee, and Eduardo Borensztein. Financial Crisis and Credit Crunch in Korea: Evidence From Firm-Level Data, (USA: International Monetary Fund, 2000) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

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

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/025
Stock No:

WPIEA0252000
ISBN:

9781451844252
ISSN:

1018-5941

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