The Impact of Foreign Bank Deleveraging on Korea

 
Author/Editor: Jain-Chandra, Sonali ; Kim, Min Jung ; Park, Sung Ho ; Shin, Jerome
 
Publication Date: May 08, 2013
 
Electronic Access: Free Full text (PDF file size is 1,178KB).
Use the free Adobe Acrobat Reader to view this PDF file

 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Korea was hit hard by the 2008 global financial crisis, with the foreign bank deleveraging channel coming prominently into play. The global financial crisis demonstrated that a sharp deleveraging can be transmitted to emerging markets through the bank lending channel to a slowdown in credit growth. The analysis finds that a sharp decline in external funding led to relatively modest decline in domestic credit by Korean banks, due to concerted policy efforts by the government in 2008. Impulse responses from a Dynamic Stochastic General Equilibrium (DSGE) model calibrated to Korea shows that it appears better prepared to handle such shocks relative to 2008. Indeed, Korea is much more resilient to such shocks due to the efforts by the authorities, which has led to the strengthening of external buffers, such as higher foreign exchange reserves and bilateral and multilateral currency swap arrangements.
 
Series: Working Paper No. 13/101
Subject(s): International banks | Korea, Republic of | Global Financial Crisis 2008-2009 | External shocks | Banking sector | Liquidity | Financial crisis | Economic models

 
English
Publication Date: May 08, 2013
ISBN/ISSN: 9781484363737/2227-8885 Format: Paper
Stock No: WPIEA2013101 Pages: 21
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
Please address any questions about this title to publications@imf.org