Credit Crunch and Post-Crisis Economic Contraction: A Case of Thailand (in English)
This paper uses the monetary transmission mechanism to examine factors contributing to the credit crunch problem in Thailand. Six factors are illustrated here. Though question about whether there was a credit crunch after the 1997 crisis is still debating, this paper proposes that credit crunch should to be a question of degree, not whether there was or not. So this paper twists the question about the credit crunch to whether the premise that there was a credit crunch in Thailand can help explain the post-crisis economic contraction. The study uses Thai macroeconomic data to estimate two investment functions, one is from the conventional IS-LM model and the other is based on the credit crunch assumption. The estimation shows that the post-crisis investment was not influenced by interest level but was restricted by previous period debt burden. These findings are consistent with the prediction of the model based on the credit crunch assumption.
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