Credit Allocation and Financial Crisis in Korea

37 Pages Posted: 10 Feb 2006

See all articles by Eduardo Borensztein

Eduardo Borensztein

Inter-American Development Bank (IADB)

Jong-Wha Lee

Korea University

Date Written: February 1999


This paper analyzes some of the structural problems associated with the Korean financial sector, and investigates whether the financial system has allocated credit in an efficient way over the past three decades. Using data for 32 manufacturing sectors, we find no evidence that credit flows were directed to the relatively more profitable sectors, either before or after the financial reforms. We also find that the flow of credits did not contribute to improve the economic performance of the favored industries over time.

Keywords: Credit Allocation, Financial Crisis, Financial Markets

JEL Classification: E44, G18, O16, O53

Suggested Citation

Borensztein, Eduardo and Lee, Jong-Wha, Credit Allocation and Financial Crisis in Korea (February 1999). IMF Working Paper, Vol. , pp. 1-37, 1999. Available at SSRN:

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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