The Credit Crunch in East Asia: What Can Bank Excess Liquid Assets Tell Us?

31 Pages Posted: 20 Apr 2016

See all articles by Pierre-Richard Agenor

Pierre-Richard Agenor

University of Manchester - School of Social Sciences

Alexander W. Hoffmaister

International Monetary Fund (IMF) - Research Department

Joshua Aizenman

National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 1999

Abstract

A two-step approach is used to assess the extent to which the credit crunch in East Asia was supply- or demand-driven. The results for Thailand suggest that the contraction in bank lending that accompanied the crisis was the result of supply factors.

Agenor, Aizenman, and Hoffmaister propose a two-step approach for assessing the extent to which the fall in credit in crisis-stricken East Asian countries was a supply- or demand-induced phenomenon.

The first step involves estimating a demand function for excess liquid assets held by commercial banks.

The second step involves establishing dynamic projections for the periods after the crisis and assessing whether or not residuals are large enough to be viewed as indicators of an "involuntary" accumulation of excess reserves.

The results for Thailand suggest that the contraction in bank lending that accompanied the crisis was the result of supply factors. Thai firms (presumably small and medium-size ones) faced binding constraints in getting access to credit markets after the crisis.

This paper - a product of the Economic Policy and Poverty Reduction Division, World Bank Institute - is part of a larger effort in the institute to understand the macroeconomic effects of credit market imperfections. Pierre-Richard Agenor may be contacted at pagenor@worldbank.org.

Suggested Citation

Agenor, Pierre-Richard and Hoffmaister, Alexander W. and Aizenman, Joshua, The Credit Crunch in East Asia: What Can Bank Excess Liquid Assets Tell Us? (November 1999). World Bank Policy Research Working Paper No. 2483. Available at SSRN: https://ssrn.com/abstract=632553

Pierre-Richard Agenor (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Alexander W. Hoffmaister

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Joshua Aizenman

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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