COLLUSION AND OVERLENDING

Jinyoung Hwang, Neville Jiang and Ping Wang

Economic Inquiry, 2007, vol. 45, issue 4, 691-707

Abstract: This study provides a theoretical background for collusion‐induced overlending being the main cause of the 1997 Korean financial crisis. Our model consists of a lending institution, a borrowing chaebol of an unknown type, and an informed politician who can influence lending decision. We show that collusion can be formed between a low‐type chaebol and the politician, and it may not be the lending institution’s best interest to deter such collusion. This equilibrium, however, is possible only when the economic environment is favorable. When the economy deteriorates, the expectations of the fall of the collusion equilibrium can trigger financial crisis. (JEL G30, D82, O16)

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1111/j.1465-7295.2007.00046.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecinqu:v:45:y:2007:i:4:p:691-707

Ordering information: This journal article can be ordered from
https://ordering.onl ... s.aspx?ref=1465-7295

Access Statistics for this article

Economic Inquiry is currently edited by Tim Salmon

More articles in Economic Inquiry from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().