This paper investigates the link between aggregate debt efficiency and debt
inertia in an highly leveraged business sector like Korea's. The model des
igns the concepts of liquidity multiplier and debt inertia to argue that th
ey are two major indicators of aggregate debt efficiency. The empirical ass
essment to the Korean business sector indicates that the aggregate debt eff
iciency depends mainly on externalities of the debt inertia rather than liq
uidity creation due to the liquidity multiplier. The economic crisis of Kor
ea in 1997 proves that such a debt efficiency structure must be vulnerable
to attack.