Since the spread of the East Asian crisis to Korea late in 1997, there is a consensus on the fact that the financial sector was the Achilles heel of the Korean economy. The structural problems of the Korean financial sector, such as government interventions, connected lending, and lack of prudential regulation and supervision, are often pointed out as the main cause of the csrisis. The purpose of this report is to look in depth at the relations between financial weaknesses and financial crises. In section 2, we discuss the structural problems in the Korean financial sector. In section 3, we investigate whether financial fragility was the main factor of financial crises based on cross-country panel data set for the period from 1980 to 1995. The result shows that the probability of financial crises increased significantly with the weaknesses in the financial sector.
The paper also evaluates whether the Korean financial system has allocated credit in an efficient way, comparing between before and after the financial crisis. Section 4 shows that using data at the level of industrial branches, credit flows were directed to less profitable sectors before the crisis, implying that the financial system did not allocate resources efficiently. On the contrary, after the crisis, we find credit appears to have been reallocated in favor of more efficient firms. Section 5 shows that using enterprise-level data, chaebol-affiliated firms have lost the preferential access to credit that they enjoyed in the pre-crisis period. Hence, credit allocation seems to have improved by becoming more market-based after the process of financial reform and corporate restructuring.
금융부문의 비효율성과 금융위기
|Series Title; No||금융조사보고서 / 2000-03|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|