Corporate Leverage, Bankruptcy, and Output Adjustment in Post-Crisis East Asia [electronic resource] Kim, Se-Jik.
- Washington, D.C. : International Monetary Fund, 1999.
- IMF eLibrary
IMF Working Papers; Working Paper No. 99/143.
IMF Working Papers; Working Paper No. 99/143
- Government document
1 online resource (29 p.)
- Local subjects:
Cost of capital.
Current account balance.
Foreign capital flows.
Gross domestic product.
Net present value.
Private capital flows.
Korea, Republic of.
- Different levels of corporate leverage are used in this paper to help explain the wide range of post-crisis output adjustment across East Asia. In the model developed here, highly leveraged firms facing a cutoff of capital inflows are threatened by bankruptcy. These firms respond by eliminating investment and selling their capital goods-at a discount-to try to stay afloat. Lower investment and wasteful capital sales shrink the aggregate capital stock, trigger deflationary pressures, and contract overall output. The available data are broadly consistent with the assumptions and predictions of the model.
- Description based on print version record.
- Kim, Se-Jik.
Stone, Mark R.
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- Restricted for use by site license.
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