Did domestic banks amplify the global financial crisis in East Asia?

Abstract

Did the financial sector in East Asia amplify the shock from the GFC? Evidently, the global fall in the demand for industrial produce manufactured in East Asia was behind the declines in exports from Asia. Conventional wisdom also suggests that the financial sector in East Asia withstood the GFC relatively well (Pomerleano, 2009). The shock to the real sector is probably the main factor behind the decline, but, given the well-established body of literature linking financial shocks and loan supplies (e.g. Peek and Rosengren, 1997), one would suspect that the output decline in Asia after the Lehman Brothers shock of September 2008 might have been amplified by the transmission of financial shocks into the real sector, even with a relatively healthy financial sector. Show more