East Asia in the Aftermath: Was there a Crunch?
IMF Working Papers, March 1, 1999
Source details
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- East Asia in the Aftermath: Was there a Crunch?
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Bibliographic details
- Authors: Atish R. Ghosh, Swart R. Ghosh
- Published: March 1, 1999
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451845679.001
Summary
- This paper uses a disequilibrium framework to investigate a possible credit crunch in the East Asian crisis countries (Indonesia, Korea, and Thailand) during 1997-98.
- It defines a credit crunch as a situation in which interest rates do not equilibrate supply and demand for credit and the aggregate amount is supply constrained, i.e. there is quantity rationing.
- In all three countries, rising real interest rates and weakening economic activity lowered credit demand and (with the exception of Indonesia in late 1997) there is little evidence of quantity rationing at the aggregate level—although individual firms may have lost access to credit.
Main findings
- Rising real interest rates and weakening economic activity reduced credit demand in Indonesia, Korea, and Thailand during 1997-98.
- With the exception of Indonesia in late 1997, there is little evidence of aggregate-level quantity rationing (supply-constrained aggregate credit) in the three crisis countries.
- Individual firms may have experienced loss of access to credit even when aggregate credit does not show quantity rationing.
Analytical approach and scope
- Framework: Disequilibrium framework focusing on whether interest rates equilibrate supply and demand for credit.
- Definition used: A credit crunch is identified where interest rates do not equilibrate supply and demand and the aggregate amount is supply constrained (quantity rationing).
- Countries analyzed: Indonesia, Korea, Thailand.
- Period analyzed: 1997-98.
Content in this bundle
- East Asia in the Aftermath: Was There a Crunch? - WP/99/38