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
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: Suggested Citation