Credit Constraints, High Fixed Costs and the Asian Currency Crisis: Firm Level Evidence from Thailand

26 Pages Posted: 16 Aug 2005

See all articles by Robert Dekle

Robert Dekle

University of Southern California - Department of Economics

Chatsurang Cathy Karnchanasai

Bank of Thailand

Pongsak Hoontrakul

Sasin of Chulalongkorn University

Date Written: May 2005

Abstract

This paper examines the relative roles of financial constraints and average cost behavior in depressing output during the 1997 currency crisis in Thailand. We analyzed Thai firm level data between 1996-2000, and found robust evidence of decreasing short-run average costs. Taking the median estimate, a 50 percent decline in output raises average costs by 8-9 percent. We attribute the decreasing short-run average costs to high fixed costs of productions, such as high capital, labor and land costs that do not vary with output. We also found evidence that the crisis-induced deterioration in firm financial characteristics significantly raised the borrowing costs of Thai firms.

Keywords: Thai currency crisis, financing constraints, over-investment, credit constraints

Suggested Citation

Dekle, Robert and Karnchanasai, Chatsurang Cathy and Hoontrakul, Pongsak, Credit Constraints, High Fixed Costs and the Asian Currency Crisis: Firm Level Evidence from Thailand (May 2005). Available at SSRN: https://ssrn.com/abstract=772425 or http://dx.doi.org/10.2139/ssrn.772425

Robert Dekle

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
213-740-8335 (Phone)

Chatsurang Cathy Karnchanasai

Bank of Thailand ( email )

273 Samsen Road
Bangkhunprom, Bangkok 10200
United States

Pongsak Hoontrakul (Contact Author)

Sasin of Chulalongkorn University ( email )

Sasa Patasala Building, Soi Chulalongkorn 12 (2)
Phyathai Road
Bangkok 10330
Thailand
+662 954 1689 (Phone)
+662 954 1690 (Fax)

HOME PAGE: http://www.pongsak.hoontrakul.com

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