The Cyclical Behavior of Household and Corporate Credit in Emerging Economies

25 Pages Posted: 16 Nov 2017 Last revised: 30 Dec 2020

See all articles by Seung-Gyu Sim

Seung-Gyu Sim

Aoyama Gakuin University

Saiah Lee

Ulsan National Institute of Science and Technology (UNIST)

Date Written: July 29, 2020

Abstract

Standard consumption-investment theory predicts counter-cyclical (pro-cyclical) behavior of household (corporate) credit whereby households' consumption smoothing and firms' investment motives are aligned. Counter to the theoretical symbiosis consistent with U.S. data, we demonstrate not only in South Korea, but also in 19 emerging economies that the pro-cyclical behavior of household credit dominates that of corporate credit. Our analysis further reveals that dominant, pro-cyclical household credit accompanied by (collateral) assets and fueled by external debt generates counter-cyclical behavior in interest rates, amplifies credit market fluctuation, and hinders the growth of small- and medium-size businesses in the South Korean economy.

Keywords: Corporate Credit, Household Credit, Emerging Markets

JEL Classification: E20, E32, F41

Suggested Citation

Sim, Seung-Gyu and Lee, Saiah, The Cyclical Behavior of Household and Corporate Credit in Emerging Economies (July 29, 2020). Available at SSRN: https://ssrn.com/abstract=3070986 or http://dx.doi.org/10.2139/ssrn.3070986

Seung-Gyu Sim

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

Saiah Lee (Contact Author)

Ulsan National Institute of Science and Technology (UNIST) ( email )

50 UNIST-gil, Ulju-gun
Ulsan, 44919
Korea, Republic of (South Korea)
+82-52-217-3202 (Phone)

HOME PAGE: http://saiahlee.unist.ac.kr

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
101
Abstract Views
784
rank
316,887
PlumX Metrics