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The Government's Role in Japanese and Korean Credit Markets : A New Institutional Economic Perspective

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Authors
Cho, Yoon Je; Hellmann, Thomas
Issue Date
1994-10
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.7 No.4, pp. 383-416
Keywords
credit policyGLIOPLIO
Abstract
This paper discusses the effectiveness of credit policies during the early stage of economic development in Japan and Korea. We examine the importance of institutional arrangements for managing credit policies in these two countries. We emphasize participatory government intervention, where credit policies could be viewed as part of an internal allocation mechanism: government, banks and large industrial firms may be said to have formed what we call a "government-led internal organization" (GLIO). We examine the theoretical foundations of this view and discuss the implications for the efficiency of credit allocation. We argue that. in early economic development. such a participatory approach may have helped overcome pervasive market imperfections. But there were also significant dangers-problems of entrenched interests and institutional inertia. In both countries, the relative importance of GLIO gradually diminished as competitive capital markets and large conglomerates ("privately-led internal organizations" or PLIO) expanded with economic growth.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1051
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.07(4) (Winter 1994)
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