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The Role of Non-Bank Financial Intermediaries in Propagating Korea's Financial Crisis

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  • William Miles

    (Department of Economics, Wichita State University, 1845 Fairmount, Wichita, KS 67260, USA)

Abstract

The Korean crisis has been analyzed for the causal role banks played through the "credit view". Non-bank lenders have grown more important than banks in providing loans, but their role in creating financial instability has been ignored. This paper fills this gap, and demonstrates that non-banks were an important source of dislocation. Moreover, these results offer a counter-argument to proposals for "narrow banking". Narrow banking would separate deposit taking and lending into two enterprises, hopefully reducing vulnerability to panics. The poor performance of non-bank lenders evenrelativeto banks in the Korean episode casts doubt on this model.

Suggested Citation

  • William Miles, 2003. "The Role of Non-Bank Financial Intermediaries in Propagating Korea's Financial Crisis," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 45-64.
    • Handle: RePEc:wsi:rpbfmp:v:06:y:2003:i:01:n:s0219091503001006
    DOI: 10.1142/S0219091503001006
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    References listed on IDEAS

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    1. Takatoshi Ito & Anne O. Krueger, 1996. "Financial Deregulation and Integration in East Asia," NBER Books, National Bureau of Economic Research, Inc, number ito_96-1.
    2. Anil K. Kashyap & Raghuram Rajan & Jeremy C. Stein, 2002. "Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit‐taking," Journal of Finance, American Finance Association, vol. 57(1), pages 33-73, February.
    3. Gerardo della Paolera & Alan M. Taylor, 1999. "Internal Versus External Convertibility and Developing-Country FinancialCrises: Lessons from the Argentine Bank Bailout of the 1930's," NBER Working Papers 7386, National Bureau of Economic Research, Inc.
    4. Ito, Takatoshi & Krueger, Anne O. (ed.), 1996. "Financial Deregulation and Integration in East Asia," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226386713, April.
    5. Kim, Hyun E., 1999. "Was the credit channel a key monetary transmission mechanism following the recent financial crisis in the Republic of Korea?," Policy Research Working Paper Series 2103, The World Bank.
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    More about this item

    Keywords

    Banking; Credit view; Financial crisis; Narrow banking;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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