An Open Economy Model of the Credit Channel Applied to Four Asian Economies Four Asian Economies

HKIMR Working Paper No. 8/2007

34 Pages Posted: 26 Aug 2007

See all articles by Spiros Bougheas

Spiros Bougheas

University of Nottingham - School of Economics

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Cihan Yalcin

Central Bank of the Republic of Turkey

Abstract

This paper provides a theoretical model of an open economy credit channel including currency mismatch and financial fragility where exporting firms have access to international credit but non-exporting firms do not. It considers the post-crisis outcome which is predicted to be dramatically different for exporters/ non-exporters. We examine firms' access to external finance in four Asian economies after 1997 using a large panel of balance sheet data. Our paper demonstrates that firm heterogeneity is critical to understanding the open economy credit channel effects post-crisis since smaller and less profitable firms are indeed less likely to obtain credit than larger, export-oriented firms.

Keywords: Credit Channel, External Finance, Asian Crisis

JEL Classification: E32, E44, E51

Suggested Citation

Bougheas, Spiros and Mizen, Paul and Yalcin, Cihan, An Open Economy Model of the Credit Channel Applied to Four Asian Economies Four Asian Economies. HKIMR Working Paper No. 8/2007. Available at SSRN: https://ssrn.com/abstract=1008191 or http://dx.doi.org/10.2139/ssrn.1008191

Spiros Bougheas (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Paul Mizen

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5479 (Phone)
+44 115 951 4159 (Fax)

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Cihan Yalcin

Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

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