Real Estate Speculation as a Source of Banking and Currency Instability: Lessons from the Asian Crisis
AbstractA central feature of the Asian currency crisis was the vast prior capital inflow into the region, and the later rapid reversal of that movement. In seeking to explain why this outflow of capital took place and was so devastating for the countries concerned, various writers have laid blame upon a combination of connected lending, poor bank supervision, moral hazard and Â“crony capitalismÂ”. Our emphasis is different. Much of the capital inflow financed a vast over-expansion of commercial real estate development. Plunging real estate values accompanied by severe difficulties in the banking and financial sector have been common occurrences across the region. The argument is that large international portfolio capital flows mediated by banks will usually lead to rapidly appreciating asset prices which will result in banking/currency crises.
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Bibliographic InfoPaper provided by University of Adelaide, Centre for International Economic Studies in its series Centre for International Economic Studies Working Papers with number 2003-18.
Length: 25 pages
Date of creation: Jul 2003
Date of revision:
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