Sterilization of capital inflows through the banking sector: evidence from Asia
AbstractThis paper develops an open-economy version of the Bernanke-Blinder model which indicates that sterilization efforts through increases in reserve requirements will have limited impact if viable financial alternatives to the commercial banking sector exists. We then examine the capital inflow surge experiences of seven developing Asian nations. Our analysis yields three stylized conclusions: First, the timing of capital inflow surges indicates a causal role for both domestic and foreign factors. Second, there is little general rule as to the most effective sterilization instrument. Finally, the experiences of the developing nations during their capital inflow surge period largely coincide with the predictions of the model. Korea, the country with the largest nonbank financial sector, had the least success in stemming the impact of capital inflow surges despite intervention through both open market operations and increased reserve requirements. ; Published in FRBSF Economic Review (1995, no. 3, p 17-34)
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Pacific Basin Working Paper Series with number 95-06.
Date of creation: 1995
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Other versions of this item:
- Mark M. Spiegel, 1995. "Sterilization of capital inflows through the banking sector: evidence from Asia," Economic Review, Federal Reserve Bank of San Francisco, pages 17-34.
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- Jeffrey A. Frankel, 1997.
"Sterilization of money inflows: Difficult (Calvo) or Easy (Reisen)?,"
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- Chuhan, Punam & Claessens, Stijn & Mamingi, Nlandu, 1998. "Equity and bond flows to Latin America and Asia: the role of global and country factors," Journal of Development Economics, Elsevier, vol. 55(2), pages 439-463, April.
- Reuven Glick & Ramon Moreno, 1994. "Capital flows and monetary policy in East Asia," Pacific Basin Working Paper Series 94-08, Federal Reserve Bank of San Francisco.
- Menzie Chinn & Michael Dooley, 1995. "National, regional and international capital markets: Measurement and implications for domestic financial fragility," International Finance 9508006, EconWPA.
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