| Most of the analyses to explain the East Asian crisis in 1997 are in terms of macroeconomic variables and causation. This study seeks to extend the perspective of the crisis on microeconomic as well as macroeconomic considerations. The microeconomic data (bank balance sheets and income statements) and macroeconomic data used in the study cover the years 1989 through 1999 for eight countries in East Asia, yielding 681 observations for the purpose of analysis.; The primary microeconomic decision that banks make relevant to the study of banking crises is the level of risk they undertake. Two risk indexes (dependent variables) are employed: the natural logarithm of the short-term debt to cash ratio, denoted as LNSTRISK in the model, and the natural logarithm of loan to customer to reserve credit loss balance sheet ratio, denoted as LNLOANRISK.; In addition to microeconomic variables and macroeconomic variables, the study places special emphasis on the interactions between microeconomic and macroeconomic variables in explaining the risk positions adopted by East Asian banks. In particular, the study examines how macroeconomic variables impact the microeconomic decision making of banks in the model. The results from the LNSTRISK model and LNLOANRISK model confirm that risk taking by banks is influenced at the microlevel for a given country's macroenvironmental conditions. |
