Credit Allocation and Financial Crisis in Korea

Eduardo Borensztein and Jong-Wha Lee

No 1999/020, IMF Working Papers from International Monetary Fund

Abstract: 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: WP; firm; loan; chaebol firm; credit allocation; Financial Crisis; Financial Markets; profit rate; short-term debt; curb market rate; debt ratio; loan market; credit guarantee funds; foreign currency; market share; credit policy; credit availability; accounting profit; Credit; Bank credit; Loans; Financial sector; East Asia (search for similar items in EconPapers)
Pages: 37
Date: 1999-02-01
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Citations: View citations in EconPapers (16)

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