Chapter

The Impacts of Bank Loans on Economic Development

Shin-ichi Fukuda

in Regional and Global Capital Flows

Published by University of Chicago Press

Published in print July 2001 | ISBN: 9780226386768
Published online February 2013 | e-ISBN: 9780226387017 | DOI: http://dx.doi.org/10.7208/chicago/9780226387017.003.0005
The Impacts of Bank Loans on Economic Development

Show Summary Details

Preview

This chapter examines the behavior and role of banks and bank lending in the crisis. It develops a model of asymmetric information, in which borrowers know whether they are creditworthy but lenders cannot distinguish between them until there is some difference in their behavior. The chapter is organized as follows. Section 4.2 shows that middle-term and long-term commercial bank loans are less mobile forms of capital flows. It also shows that a large fraction of external bank debt had been financed by short-term loans not only in the East Asian countries but also in a large number of other countries. Section 4.3 focuses on the role of monitoring in explaining these findings. Section 4.4 explains the basic structure of the theoretical model, and Section 4.5 defines long-term and short-term debt contracts. Section 4.6 investigates the maturity choices by all borrowers and shows that the vulnerable financial structures in developing countries might emerge as a result of efficient monitoring activities by banks. Sections 4.7 and 4.8 discuss how the main results will change when one of the key assumptions in the model is altered. Section 4.9 summarizes the results and their policy implications. Two commentaries are included at the end of the chapter.

Keywords: Asian financial crises; banks; bank lending; borrowers; lenders; commercial bank loans; debt contracts

Chapter.  12238 words.  Illustrated.

Subjects: International Economics

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.