Erschienen:
Cambridge, Mass: National Bureau of Economic Research, December 1999
Erschienen in:NBER working paper series ; no. w7446
Umfang:
1 Online-Ressource
Sprache:
Englisch
DOI:
10.3386/w7446
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
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Beschreibung:
This paper analyzes the implication of inefficient financial intermediation for crisis management in a country where firms are highly-indebted. The analysis is based on a model in which firms rely on bank credit to finance their working capital needs and lenders face high state verification and enforcement costs of loan contracts. The analysis shows that higher contract enforcement and verification costs, lower expected productivity, or higher volatility, may shift the economy to the wrong side of the debt Laffer curve, with potentially sizable employment and output losses. The main implication of this analysis for the current policy debate on crisis management is East Asia is that dept reduction, in addition to debt rescheduling, may be required as part of the process of reducing financial sector inefficiencies