Financial Crisis and Credit Crunch in Korea: Evidence from Firm-Level Data

29 Pages Posted: 30 Jan 2006

See all articles by Eduardo Borensztein

Eduardo Borensztein

Inter-American Development Bank (IADB)

Jong-Wha Lee

Korea University

Date Written: February 2000

Abstract

This paper analyzes the credit crunch following the recent financial crisis in Korea. Using enterprise-level data, we find that there were big differences in the magnitude of the credit contraction across different types of firms. In particular, chaebol (conglomerate)-affiliated firms appeared to have lost the preferential access to credit they enjoyed in the pre-crisis period, and credit appears to have been reallocated in favor of more efficient firms. This suggests that the credit crunch suffered by certain sectors can be attributed to the adjustment by banks and enterprises to the restructuring of the financial sector, rather than to tight monetary policy or an external credit constraint.

Keywords: Korea, credit crunch, financial crisis

JEL Classification: E52, O16, O53

Suggested Citation

Borensztein, Eduardo and Lee, Jong-Wha, Financial Crisis and Credit Crunch in Korea: Evidence from Firm-Level Data (February 2000). IMF Working Paper, Vol. , pp. 1-29, 2000. Available at SSRN: https://ssrn.com/abstract=879373

Eduardo Borensztein (Contact Author)

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Jong-Wha Lee

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

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