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Financial restructuring after the 1997 crisis and impact of the Lehman shock : Path dependence of financial systems in Korea and Thailand

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  • Financial restructuring after the 1997 crisis and impact of the Lehman shock
  • Okabe, Yasunobu
  • JICA Research Institute


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Title Financial restructuring after the 1997 crisis and impact of the Lehman shock
Similar Titles
Sub Title

Path dependence of financial systems in Korea and Thailand

Material Type Reports
Author(English)

Okabe, Yasunobu

Publisher

Tokyo:JICA Research Institute

Date 2013-01
Series Title; No JICA RI Working Paper / 51
Subject Country South Korea(Asia and Pacific)
Thailand(Asia and Pacific)
Language English
File Type Link
Subject Economy < Economic Conditions
Economy < Economic Administration
Economy < Economic System
Holding JICA Research Institute

Abstract

After the 1997 Asian financial crisis, South Korea (Korea) and Thailand implemented financial restructuring in a similarly successful manner and regained the healthiness of their banking sectors. However, when the Lehman shock hit their financial markets in 2008, its impact on the two countries was quite different. Korea, which had performed better in the financial restructuring than Thailand, was driven to the brink of a second financial crisis in 2008 while Thailand weathered the shock easily. This paper addresses this paradoxical contrast from the path dependence perspective, focusing on different historical paths of formation and change of the respective financial systems. It concludes that the successful state-led financial restructuring in Korea fostered banks’ propensity of active lending while the private sector-led reform in Thailand only reinforced banks’ conservative lending behavior. (The rest omitted)