The credit crunch in East Asia: What can bank excess liquid assets tell us?

Pierre Richard Agénor, Joshua Aizenman, Alexander W. Hoffmaister

Research output: Contribution to journalArticlepeer-review

54 Scopus citations


The paper proposes a two-step approach to assess the extent to which the fall in credit in crisis-stricken East Asian countries was a supply- or demand-induced phenomenon. The first step is based on the estimation of demand function for excess liquid assets by commercial banks. Such a function is derived analytically in the first part of the paper. The second step consists of establishing dynamic projections for the periods following the crisis and assessing whether or not residuals are large enough to be viewed as indicators of "involuntary" accumulation of excess reserves. Results for Thailand indicate that the contraction in bank lending that accompanied the crisis was the result of supply factors.

Original languageEnglish
Pages (from-to)27-49
Number of pages23
JournalJournal of International Money and Finance
Issue number1
StatePublished - 1 Feb 2004
Externally publishedYes


  • Credit crunch
  • Excess liquid assets
  • Thailand

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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