Abstract
This paper employs a panel of household data from Korea to examine how households coped with the shortfall in consumption during 1994-1998, which encompasses the financial crisis of 1997. We adopt the econometric framework from Glewwe and Hall [Glewwe, P., & Hall, G. (1998). Are some groups more vulnerable to macroeconomic shocks than others? Hypothesis tests based on panel data from Peru.f Journal of Development Economics, 56, 181-206] and estimate a household consumption growth equation. We find that larger households tend to be protected to a greater extent from shortfall in consumption, and that the vulnerability of female-headed households is not greater than that of male-headed households. Among the coping strategies, private transfers act both as an ex-ante risk-managing device and an ex-post coping mechanism. Urban households and those headed by the self-employed experienced a larger shortfall in consumption during the crisis. While credit was used to smooth consumption of children's education, medical and childcare services during the pre-crisis years, it was not utilized as a coping strategy during the 1997 crisis, possibly due to the credit crunch caused by stringent monetary policies. Instead, households cut back consumption of luxurious and durable goods to preserve food consumption and spending on children's education. We do not find evidence of households liquidating their assets to cushion the shortfall in consumption, during the 1997 crisis. It is possible that they did not liquidate their assets because land and stock prices declined significantly.
| Original language | English |
|---|---|
| Pages (from-to) | 239-254 |
| Number of pages | 16 |
| Journal | Journal of Asian Economics |
| Volume | 16 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2005 Apr 1 |
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Keywords
- Asia
- Currency crisis in Korea
- Korea
- Risk-coping strategies
- Vulnerability
ASJC Scopus subject areas
- Economics and Econometrics
- Finance
Cite this
How did Korean households cope with negative shocks from the financial crisis? / Goh, Chor Ching; Kang, Sung Jin; Sawada, Yasuyuki.
In: Journal of Asian Economics, Vol. 16, No. 2, 01.04.2005, p. 239-254.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - How did Korean households cope with negative shocks from the financial crisis?
AU - Goh, Chor Ching
AU - Kang, Sung Jin
AU - Sawada, Yasuyuki
PY - 2005/4/1
Y1 - 2005/4/1
N2 - This paper employs a panel of household data from Korea to examine how households coped with the shortfall in consumption during 1994-1998, which encompasses the financial crisis of 1997. We adopt the econometric framework from Glewwe and Hall [Glewwe, P., & Hall, G. (1998). Are some groups more vulnerable to macroeconomic shocks than others? Hypothesis tests based on panel data from Peru.f Journal of Development Economics, 56, 181-206] and estimate a household consumption growth equation. We find that larger households tend to be protected to a greater extent from shortfall in consumption, and that the vulnerability of female-headed households is not greater than that of male-headed households. Among the coping strategies, private transfers act both as an ex-ante risk-managing device and an ex-post coping mechanism. Urban households and those headed by the self-employed experienced a larger shortfall in consumption during the crisis. While credit was used to smooth consumption of children's education, medical and childcare services during the pre-crisis years, it was not utilized as a coping strategy during the 1997 crisis, possibly due to the credit crunch caused by stringent monetary policies. Instead, households cut back consumption of luxurious and durable goods to preserve food consumption and spending on children's education. We do not find evidence of households liquidating their assets to cushion the shortfall in consumption, during the 1997 crisis. It is possible that they did not liquidate their assets because land and stock prices declined significantly.
AB - This paper employs a panel of household data from Korea to examine how households coped with the shortfall in consumption during 1994-1998, which encompasses the financial crisis of 1997. We adopt the econometric framework from Glewwe and Hall [Glewwe, P., & Hall, G. (1998). Are some groups more vulnerable to macroeconomic shocks than others? Hypothesis tests based on panel data from Peru.f Journal of Development Economics, 56, 181-206] and estimate a household consumption growth equation. We find that larger households tend to be protected to a greater extent from shortfall in consumption, and that the vulnerability of female-headed households is not greater than that of male-headed households. Among the coping strategies, private transfers act both as an ex-ante risk-managing device and an ex-post coping mechanism. Urban households and those headed by the self-employed experienced a larger shortfall in consumption during the crisis. While credit was used to smooth consumption of children's education, medical and childcare services during the pre-crisis years, it was not utilized as a coping strategy during the 1997 crisis, possibly due to the credit crunch caused by stringent monetary policies. Instead, households cut back consumption of luxurious and durable goods to preserve food consumption and spending on children's education. We do not find evidence of households liquidating their assets to cushion the shortfall in consumption, during the 1997 crisis. It is possible that they did not liquidate their assets because land and stock prices declined significantly.
KW - Asia
KW - Currency crisis in Korea
KW - Korea
KW - Risk-coping strategies
KW - Vulnerability
UR - http://www.scopus.com/inward/record.url?scp=18444382059&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=18444382059&partnerID=8YFLogxK
U2 - 10.1016/j.asieco.2005.01.006
DO - 10.1016/j.asieco.2005.01.006
M3 - Article
VL - 16
SP - 239
EP - 254
JO - Journal of Asian Economics
JF - Journal of Asian Economics
SN - 1049-0078
IS - 2
ER -