Abstract
This Selected Issues report on Thailand discusses the rapid growth years of the country before and after the 1997 balance-of-payments crisis. The report discusses development of the crisis and the steps taken to normalize the situation; credit growth before and after the crisis; public debt dynamics in the aftermath of the crisis; export performance before and after the crisis; and an analysis of the role of fiscal policy that led to the 1997 crisis. The report also highlights weaknesses that were threatening the sustainability of Thailand's economic growth.
IV. Credit Growth Before and After the Crisis1
A. Introduction
76. The recent combination of a sharp output decline and sluggish credit growth has focussed attention on the existence of a “credit crunch.” Citing data showing a decline in credit, and bolstered by anecdotal evidence that firms—especially in the early stages of the crisis—were having difficulty securing loans, many observers have concluded that a credit crunch exists in Thailand (see, for example, Domac and Ferri, 1999). According to this view, the capacity and willingness of banks to lend were diminished through an erosion of bank capital and a deterioration in firms’ balance sheets. To some, policies supported under the Fund arrangement—in particular, the use of high interest rates to stabilize the currency and the tightening of prudential regulations—only exacerbated the credit crunch, thereby deepening the recession and prolonging the period of economic turmoil (Ito and Pereira da Silva, 1999).
77. However, a slowdown in credit growth is not, by itself, evidence of a credit crunch; what matters is whether the slowdown is primarily demand or supply driven (Box 1). As discussed below, there is evidence that both supply and demand factors have been at work. In particular, the demand for credit has declined in line with the steep fall in aggregate demand and associated high rates of excess capacity. On the supply side, banks have become more risk averse, with many indicators pointing to a tightening of credit conditions. What is less clear is which factor has dominated. In practice, disentangling these effects is difficult, given limitations in data availability and methodological problems in identifying the respective roles of supply and demand factors.
78. Setting aside the question of whether a credit crunch exists in Thailand, a decline in credit is not entirely unexpected, nor even undesirable. Rather, the credit slowdown may reflect a beneficial process of de-leveraging, as the economy undergoes an adjustment from over-indebtedness and inflated asset prices. In this respect, it may be part of the economy’s external adjustment, reflected in the sharp reversal of the external current account and corresponding decline in private external debt. Additionally, with indications of nonbank financing picking up, it may also reflect a shift in firms’ relatively heavy, and perhaps excessive, reliance on bank lending. (As seen in the accompanying chart, Thailand’s credit-to-GDP ratios are high by emerging market standards). Finally, with a recovery now underway, the aggregate credit figures may hide an underlying shift in the allocation of credit, from over-indebted and unproductive sectors of the economy, to more productive ones.
What is a Credit Crunch?
The term “credit crunch” has been used loosely in the literature, with a range of meanings. The broadest, and perhaps most popularly used, definition refers to any situation of tight credit conditions, brought on by such factors as a tightening of monetary policy, an increase in the perceived riskiness of lending, or a reduction in the ability of financial institutions—for whatever reason—to extend credit. The most narrow definition, on the other hand, refers to a situation of credit rationing, whereby at prevailing interest rates, the available supply of credit is insufficient to meet demand.
In the context of Thailand’s economic crisis, the most meaningful definition would seem to be a leftward shift in the supply curve for bank loans. In theory, several factors could give rise to such a shift:
The existence of a “capital crunch” (Syron, 1991), which could arise, for example, in the aftermath of an asset price bubble financed by bank credit. When asset prices fall, banks may be forced to use up capital in order to write off loans. To meet capital adequacy ratios, they might respond by reducing assets and cutting back lending. A similar situation could arise if regulatory standards, or their enforcement, are tightened.
An exogenous increase in risk aversion by lenders arising, for example, from fears of a pending recession. Risk aversion may also increase due to factors associated with a weakening of bank capital (as mentioned above).
Monetary policy tightening can also give rise to a leftward shift of lending supply curves, through a balance sheet (net worth) or bank lending channel (Bernanke and Gertler, 1995 and Bernanke and Blinder, 1988). In the first case, a rise in interest rates directly weakens firms’ balance sheets by increasing debt service burdens and reducing asset prices (and hence collateral values). As a result, firms may face more stringent lending conditions. In the second case, a tightening dries up bank reserves and deposits, leading to a decline in the supply of loanable funds.
Credit rationing, though not inconsistent with a leftward shift in lending supply curves, need not be present for there to be a credit crunch (Bernanke and Lown, 1991). For a credit crunch to exist, all that matters is that the effective cost of credit to borrowers increases (measured by the spread between lending rates and the safe rate of return). This can occur either because of problems in the banking sector or due to weaknesses in borrowers’ balance sheets.
Private Credit to GDP Ratio
(average for 1990-95)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: FSPrivate Credit to GDP Ratio
(average for 1990-95)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: FSPrivate Credit to GDP Ratio
(average for 1990-95)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: FS79. The remainder of this chapter discusses the recent evolution of credit and its components, with a view to assessing the factors behind the credit slowdown. Section B looks at the evolution of credit and its sectoral breakdown. Section C presents the available evidence on the role of supply and demand factors in explaining the credit slowdown. The final section draws some conclusions.
B. The Evolution of Private Credit
80. As in the case of Thai corporations, the current difficulty faced by banks and finance companies has its roots in the pre-crisis period, when lending grew rapidly. From mid-1995 through the end of 1996, the growth rate of real private credit (year-on-year) averaged well above 15 percent, or twice the rate of real GDP growth. While commercial banks and finance companies extended credit at a rapid pace averaging, respectively, above 10 percent and 20 percent on an annual basis, BIBFs—whose “out-in” lending is entirely foreign currency denominated—expanded credit at the fastest pace, recording average annual growth rates over 35 percent.2 A classic boom-bust cycle was thus set in motion, so that when asset prices and firm profitability began to decline, so too did the outlook for banks.3
Pre-crisis Real Credit Growth
(in percent, year-on-year)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Pre-crisis Real Credit Growth
(in percent, year-on-year)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Pre-crisis Real Credit Growth
(in percent, year-on-year)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Stock Prices
(SET Index)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and Fund staff estimates.Stock Prices
(SET Index)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and Fund staff estimates.Stock Prices
(SET Index)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and Fund staff estimates.81. The stock of private credit outstanding has fallen since the beginning of the crisis. After peaking in April 1997, the level of real private credit (seasonally adjusted, and after correcting for changes in valuation due to exchange rate fluctuations) declined steadily through end-1998, as seen in the chart below, but by less than the fall in manufacturing output. Thereafter, the stock of credit leveled off, even as manufacturing output recovered strongly. Thus, by September 1999, while manufacturing output had recovered to above pre-crisis levels, credit remained some 13 percent below the peak reached in mid-1997. This suggests two, not mutually exclusive, possibilities. First, that the credit-intensity of production has fallen as firms rely increasingly on retained earnings and other sources of nonbank financing or, second, that there has been a shift in the allocation of credit.4 There is evidence, as seen in the accompanying chart, of an upward trend in nonbank financing, particularly of corporate bond issues. As seen in the table below, there is also evidence of a reallocation of credit, as the share of lending to the manufacturing sector has risen significantly since end-1996 for all categories of creditors. This has come about through a reduction in the share of credit for personal consumption, construction, and real estate.
Non-bank Financing
(in percent of stock of bank credit)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of ThailandNon-bank Financing
(in percent of stock of bank credit)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of ThailandNon-bank Financing
(in percent of stock of bank credit)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand
Real Credit and Manufacturing Output
(1997q1-100)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and Fund staff estimates.Real Credit and Manufacturing Output
(1997q1-100)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and Fund staff estimates.Real Credit and Manufacturing Output
(1997q1-100)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and Fund staff estimates.Sectoral Credit Shares
end-August for non-BIBF.
Sectoral Credit Shares
| end-1996 | June 1999 1/ | |||||
|---|---|---|---|---|---|---|
| Banks | BIBFs | Finance Companies | BIBF | Banks | Finance Companies | |
| (in percent of credit outstanding) | ||||||
| Manufacturing | 23 | 48 | 15 | 27 | 61 | 21 |
| Personal Consumption 2/ | 15 | 2 | 26 | 13 | 1 | 22 |
| Construction | 5 | 3 | 4 | 5 | 2 | 3 |
| Real Estate | 9 | 3 | 24 | 11 | 1 | 23 |
| Other | 48 | 44 | 31 | 45 | 35 | 32 |
end-August for non-BIBF.
Sectoral Credit Shares
| end-1996 | June 1999 1/ | |||||
|---|---|---|---|---|---|---|
| Banks | BIBFs | Finance Companies | BIBF | Banks | Finance Companies | |
| (in percent of credit outstanding) | ||||||
| Manufacturing | 23 | 48 | 15 | 27 | 61 | 21 |
| Personal Consumption 2/ | 15 | 2 | 26 | 13 | 1 | 22 |
| Construction | 5 | 3 | 4 | 5 | 2 | 3 |
| Real Estate | 9 | 3 | 24 | 11 | 1 | 23 |
| Other | 48 | 44 | 31 | 45 | 35 | 32 |
end-August for non-BIBF.
82. Much of the decline in overall private credit can be explained by an outflow through offshore banks (BIBFs), corresponding to the economy’s external adjustment. In large part, the outflow occurred as Japanese banks, which account for the bulk of Thailand’s maturing obligations, contracted their external assets in light of growing problems at home. Although this withdrawal was partially offset through an increase in capital—a substitution of debt for equity—by foreign firms and joint ventures, the broader regional capital flight exacerbated the outflow. Thus, while overall private credit declined by about 13 percent in real terms from April 1997 through the end of 1998, excluding BIBFs the decline amounted to a more modest 7 percent. Since the beginning of 1999, moreover, non-BIBF credit has partially recovered, up by about 2 percent in real terms through September (2.8 percent at an annualized rate).5 In part, this reflects a substitution from foreign currency lending by BIBFs to domestic currency lending by commercial banks, as the recent decline in domestic interest rates has made borrowing in baht relatively more attractive. Banks, for example, commonly report that the lower domestic interest rates have prompted their customers to switch from foreign to domestic currency loans. Large corporations have also issued domestic bonds, using the proceeds to pay off their relatively costly foreign currency denominated debt.
Real Privite Credit
(1997q1=100)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Real Privite Credit
(1997q1=100)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Real Privite Credit
(1997q1=100)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
C. The Contributions of Supply and Demand Factors
Supply
83. While there is evidence that the supply of credit has been constrained, particularly early in the crisis, the indicators are at best, mixed. Evidence of a supply shift includes:
An observed decline in credit in conjunction with an increase in real lending rates. As seen in the accompanying chart, real lending rates increased by more than 13 percentage points from July 1997 through June 1998.6 This occurred at a time when the level of credit outstanding declined by 14 percent in real terms. Thereafter, however, real lending rates declined as tight monetary policy—arguably a factor reducing credit supply—was eased. The subsequent period during which lending rates declined but credit growth remained flat or negative, may suggest that during the latter period shrinking credit demand, rather than supply, has played a more important role in the evolution of credit. While the behavior of these price and quantity variables are suggestive of supply and demand curve shifts, two caveats are worth noting. First, the lending rates used here are prime rates, and may not reflect the true average lending rate (for which data are unavailable). Second, and more importantly, the interest rate pattern is sensitive to the measure of forward-looking inflation. For example, when contemporaneous 12-month inflation rate is used as a proxy for expected inflation, real interest rates are seen to have declined gradually through mid-1998.
A number of indicators pointing to increased risk aversion by banks (see Chart 1): (i) the ratio of risk weighted assets (i.e., loans) to total assets has fallen steeply (about 20 percentage points) since the beginning of 1997; (ii) the share of overdrafts in total lending has declined since mid-1997 (about 5 percentage points), suggesting that banks have sought greater control over their lending; and (iii) there is evidence that average lending rates have moved closer to prime rates since end-1998, suggesting that banks have increasingly shifted their lending to relatively safe customers.7
Minimum Leading Rate and Private Credit
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Minimum Leading Rate and Private Credit
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Minimum Leading Rate and Private Credit
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Indicators of Risk Aversion by Banks
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and staff estimates.1/ Imputed from bank income statements.Indicators of Risk Aversion by Banks
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and staff estimates.1/ Imputed from bank income statements.Indicators of Risk Aversion by Banks
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and staff estimates.1/ Imputed from bank income statements.
Loan Growth
(Sept. 1998 to Sept. 1999)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source. Bank of Thailand and CEIC database.Loan Growth
(Sept. 1998 to Sept. 1999)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source. Bank of Thailand and CEIC database.Loan Growth
(Sept. 1998 to Sept. 1999)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source. Bank of Thailand and CEIC database.
Loan Growth
(Sept 1998 to Sept. 1999)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and CEIC database.Loan Growth
(Sept 1998 to Sept. 1999)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and CEIC database.Loan Growth
(Sept 1998 to Sept. 1999)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand and CEIC database.84. On the other hand, there is no correlation between lending and measures of bank strength, as would be expected in a supply-driven credit crunch. As seen below, an analysis of loan growth by Thailand’s 13 commercial banks from September 1998 to September 1999 does not reveal a positive correlation, as the “capital crunch” view would predict, between the rate of growth and banks’ capital adequacy ratios at end-March 1999 (adjusted for additional provisions needed to bring banks in line with end-2000 LCP rules). Similarly, as seen in the accompanying chart, there is no (negative) correlation between loan growth and banks’ NPL levels.
Demand
85. Notwithstanding evidence that lending supply curves have shifted, a number of other indicators suggest that demand, rather than supply, has been the constraining factor behind sluggish credit growth:
Survey data suggests that weak demand, rather than insufficient access to credit, has been the most important factor behind firms’ output declines and liquidity problems.8 Based on a survey of 659 Thai firms from November 1998 to February 1999, Dwor-Frecaut et. al. conclude that limited access to working capital and suppliers’ credit ranks low on a list of the reasons for firms’ output declines. In particular, access to credit ranked behind such factors as weak domestic demand, high input costs associated with exchange rate depreciation, and high labor costs. Even here, however, the results are mixed. In particular, over half of Thai firms reported having liquidity problems and, while lower revenue was cited as the most significant source, a large number of firms also sighted lack of loans as a problem.
Available data on loan applications and approvals do not reveal a widening gap between supply and demand.9 This is particularly true for commercial banks (i.e., excluding BIBFs), where the gap between applications and approvals is low by historical standards (data on BIBFs is not available prior to June 1997). The significant decline in the demand for loans is evident by the sharp drop in loan applications, a trend that began in early 1996. Data for all banks, including BIBFs, is more difficult to interpret given limited data availability (the series only begins in mid-1997). While the gap between applications and approvals is larger than for non-BIBF banks, it is not clear that there has been a persistent widening of the gap. In any event, if there is evidence of a credit crunch from loan applications and approvals, it is from BIBFs rather than domestic banks.
Econometric results suggest that the decline in credit demand has outpaced the decline in supply. In estimating credit supply and demand functions in the context of a disequilibrium framework, Ghosh and Ghosh (1999) find little evidence of persistent credit rationing at the aggregate level in Thailand. Although the real credit supply declined significantly in early 1998, they find that credit demand declined by even more.10
Credit Applications and Approvals of Commercial Banks
(in billions of baht)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of ThailandCredit Applications and Approvals of Commercial Banks
(in billions of baht)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of ThailandCredit Applications and Approvals of Commercial Banks
(in billions of baht)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of Thailand
Credit Applications and Approvals or All Banks
(including BIBFS)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of ThailandCredit Applications and Approvals or All Banks
(including BIBFS)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of ThailandCredit Applications and Approvals or All Banks
(including BIBFS)
Citation: IMF Staff Country Reports 2000, 021; 10.5089/9781451836813.002.A004
Source: Bank of ThailandD. Conclusions
86. Evidence on the existence of a supply-driven “credit crunch” in Thailand is mixed, though there is little doubt that the supply of credit has contracted. Tightened credit conditions, particularly at the beginning of the crisis, are evidenced by rising real interest rates, declining credit aggregates and indicators of increased risk aversion by banks. More recently, however, there is evidence that supply side constraints may have eased. Real lending rates have declined, domestic bank lending has risen, and output growth has resumed.
87. Given the existence of demand side factors and only mixed evidence on the supply side, it is difficult to establish that there has been a generalized credit crunch. In view of the high rates of over-capacity, investment, and hence credit demand, are weak. Survey results and evidence from loan applications and approvals, supported by recent econometric work, also suggest that demand, rather than supply, may have played the largest role behind the decline in credit. This does not mean, however, that supply factors have been unimportant; for given demand levels, the inward shift in credit supply curves have reduced credit and economic activity.
88. While the credit slowdown—demand or supply driven—is associated with the economic contraction, it is nevertheless part of Thailand’s de-leveraging process. In this respect, the slowdown has its roots in the pre-crisis period, when lending, driven by large capital inflows and rising asset prices, grew rapidly. The unwinding of this boom entails a withdrawal of credit, both domestically and externally.
89. Looking ahead, however, supply side factors could begin to dominate as credit demand starts to recover. As the demand for investment inevitably picks up, an expansion in bank credit will be needed. Although stronger corporations have been able to raise funds in the commercial paper market, the vast majority of Thai firms will continue to depend on bank credit. Thus, the ability and willingness of banks to meet this demand will be key to sustained growth.
References
Bemanke, Ben S. and Alan S. Blinder, “Credit, Money, and Aggregate Demand,” American Economic Review, Papers and Proceedings, May 1988, 78, 435–439.
Bemanke, Ben S. and Mark Gertler. “Inside the Black Box: The Credit Channel of Monetary Policy Transmission,” Journal of Economic Perspectives, Fall 1995, Volume 9, Number 4, 3–10.
Bemanke, Ben S. and Cara S. Lown, “The Credit Crunch,” Brookings Papers on Economic Activity, 2: 1991, 205–247.
Domac, Ilker and Giovanni Ferri, “The Credit Crunch in East Asia: Evidence from Field Findings on Bank Behavior and Policy Issues,”, World Bank, Paper presented at the Workshop, Credit Crunch in East Asia: What Do We Know? What Do We Need to Know?, November 30-December 1, 1999.
Dwor-Frecaut, Dominique, and Mary Hallward-Driemeier “Corporate Credit Needs and Corporate Governance,” World Bank, Paper presented at the Workshop, Credit Crunch in East Asia: What Do We Know? What Do We Need to Know?, November 30-December 1, 1999.
Ghosh, Swati R. and Atish R. Ghosh, “East Asia in the Aftermath: Was There a Crunch?” IMF Working Paper, March 1999 (WP/99/38).
Ito, Takatoshi and Luiz A. Pereira da Silva, “The Credit Crunch in Thailand during the 1997-98 Crisis: Theoretical and Operational Issues with the JEXIM Survey,” World Bank, Paper presented at the Workshop, Credit Crunch in East Asia: What Do We Know? What Do We Need to Know?, November 30-December 1, 1999.
Mishkin, Frederic, “Symposium on the Monetary Transmission Mechanism,” Journal of Economic Perspectives, Fall 1995, Volum 9, Number 4, 3–10.
Syron, Richard F. “Are We Experiencing a Credit Crunch?” New England Economic Review, July/August 1991, 3 –10.
Waiquamdee, Atchana, et. al., “Corporates’ Views of the Constraints to Recovery,” Paper presented at the Conference on Asian Corporate Recovery: Corporate Recovery and Government Policy, Bangkok, March 31-April 2, 1999.
Prepared by Stephen Schwartz (APD).
The Bangkok International Banking Facility (BIBF) was set up in 1993 to enhance capital inflows and promote Thailand as a regional financial center. Tax incentives were granted for BIBF operations, with the bulk of activity consisting of “out-in” transactions (borrowing from abroad and lending domestically).
In this respect, the experience of Thai banks is reminiscent of what happened to U.S. banks in New England in the mid-1980s and early-1990, when a collapse of a real estate bubble forced banks to use up capital in order to write down loans. To meet regulatory capital standards, which were being phased in under the Basle Accord, they responded by shrinking their assets and cutting back lending. (See Bernanke and Lown, and Syron.)
A contributing, though less benign, factor may be that some firms have suspended servicing their loans, thereby “obtaining credit” by generating NPLs. For further discussion of developments in NPLs, see Chapter III.
Partly as a result of this trend, there has been a shift in the source of credit. At end-1996, commercial banks accounted for 63 percent of total private credit, finance companies accounted for 25 percent, and BIBFs accounted for 12 percent. By end-September 1999, the shares had changed to 84 percent, 9 percent, and 7 percent, respectively.
Real lending rates are measured by using actual one-year ahead inflation. The magnitude of the rise and subsequent decline in real lending interest rates is broadly similar when using a shorter inflation time horizon (i.e., 3-months ahead), though the timing of the steep rise is delayed by several months.
The behavior of these indicators, however, could equally be explained by demand and statistical factors. For example, the decline in the ratio of risk weighted to total assets could reflect a decline in the demand for loans; the decline in the share of overdrafts could reflect a decline in demand for that type of credit; and the decline in wedge between average and prime lending rates could simply reflect the low interest rates being granted on restructured loans.
The survey was undertaken by the Bank of Thailand in collaboration with the World Bank, as part of a larger project covering Indonesia, Korea, Malaysia, and the Philippines. See also Waiquamdee et. al. (1999).
Comprehensive data on applications and approvals are not available. In particular, the series reported here excludes applications below B 30 million (about $0.8 million), and for many reporting banks also excludes applications for loans to finance working capital requirements.
As noted by the authors, these results do not rule out the possibility of a credit crunch for individual firms or sectors of the economy. There are also a couple of shortcomings of their approach, which suggest a direction for further research. First, their data is based on the monetary survey, which excludes finance companies. Second, it is possible that their credit supply function may overstate the true willingness of banks to lend, since it does not incorporate measures of banking sector distress (such as NPLs and bank net worth).
