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Credit Rationing as Another Cause of Financial Crisis: Evidence from Thailand

NIDA Economic Review Journal

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Title Credit Rationing as Another Cause of Financial Crisis: Evidence from Thailand
 
Creator Rukumnuaykit, Pungpond
 
Description This paper examines the credit market to determine whether slow growth was caused by problemsin credit markets as many scholars have suggested. In particular, the question of how a rise ininterest rates affects behaviors of the banks and the firms, and how and to what extent creditrestriction affects sales and growth were investigated. The model developed in the paper suggeststhat when loan terms are not restricted, lenders will statistically discriminate against small firms.In other words lenders will charge small firms higher interest rates. When loan contract terms arerestricted, lenders might ration credit buy not lending to small firms that have higher risks.However, when interest rates are high, large firms might self-select out of the loan marketsbecause they have other alternatives to cope with credit problem. The analysis from Thai dataduring the financial crisis reveals that Thailand faced mild credit rationing problems before thecrises. The problem became stronger, but not severe, during the crises. Trade credit-borrowingratio and the results from our regression equation suggest that the self-selection problem wasmore pronounced during the crises. However, even though problems of credit rationing andadverse selection did occur, the importance of trade credits and borrowing on sales declinedduring the crises.
 
Publisher Development Economic Review (พัฒนาการเศรษฐกิจปริทรรศน์)
 
Date 2007-06-01
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier //tci-thaijo.org/index.php/NER/article/view/23126
 
Source Development Economic Review (พัฒนาการเศรษฐกิจปริทรรศน์); Vol 2 No 2 (2550): NIDA Economic Review Journal; 1
1906-2540
 
Language eng
 
Relation //tci-thaijo.org/index.php/NER/article/view/23126/19751
 
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