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Credit Reallocation, Deleveraging, and Financial Crises
Author(s) -
HYUN JUNGHWAN,
MINETTI RAOUL
Publication year - 2019
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12575
Subject(s) - deleveraging , boom , financial crisis , credit crunch , monetary economics , credit cycle , financial system , economics , great recession , business , finance , business cycle , macroeconomics , labour economics , environmental engineering , engineering
This paper studies how the process of reallocation of credit across firms behaves before and after financial crises. Applying the methodology typically used for measuring job reallocation, we track credit reallocation across Korean firms for over three decades (1980–2012). The credit boom preceding the 1997 crisis featured a slowdown of credit reallocation. After the crisis and the associated reforms, the creditless recovery (deleveraging) masked a dramatic intensification and increased procyclicality of credit reallocation. The findings suggest that the intensification of reallocation was efficiency‐enhancing.