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Title: |
Financing Export-Oriented Catching-up in
Korea: Credit-Rationing, Sustained High Growth and Financial Chaos |
| Author: |
Hong, Wontack |
| Author
Affiliation: |
Seoul U |
| Source: |
International Economic Journal, Spring 1998, v. 12, no. 1, pp. 141-153 |
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Publication Date: |
Spring 1998 |
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Abstract: |
In the 1960s and 1970s, bank credits were
rationed essentially on the basis of firm's export-performance in Korea.
Financial institutions did not have the ability to properly evaluate
prospective entrepreneurs and potentially high return projects. It was
cost-quality competition at the international export market that
screened firms for efficiency, and this natural selection process of the
fiercely competitive international market compensated for the
backwardness of the Korean financial sector, thereby enabling Korea's
sustained high growth. Credit-rationing on the basis of firm's export
performance very much overcame the adverse selection problems in credit
markets. Since the early 1980s, however, bank credit has been rationed
less and less in proportion to export performance, while the nominal
financial liberalization has failed to develop the Korean financial
sector. This may explain the financial chaos in the 1990s. |
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