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International Capital Crunches

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  • Ashoka Mody
  • Mark P. Taylor

Abstract

We examine the determinants of capital flows to four developing countries during the 1990s using an explicitly disequilibrium econometric framework in which the supply and demand for capital are not necessarily equal and the actual amount of the flow is determined by the ‘short side’ of the market. We are thus able to detect instances of ‘international capital crunch’—where capital flows are curtailed because of supply-side rationing—and to relate these instances to movements in the underlying fundamentals. The analysis highlights the role of asymmetric information—as distinct from the traditional concern with default risk—in conditioning capital flows.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/43.

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Length: 26
Date of creation: 01 Feb 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/43

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Related research

Keywords: Capital flows; international capital; international capital crunch; stock market; capital inflows; capital flow; capital market; cost of capital; bond; capital inflow; capital markets; credit rating; international capital markets; credit rationing; bonds; stock market index; domestic capital; capital movements; determinants of excess supply; financial markets; capital controls; private capital; international financial markets; foreign capital; bond spread; private domestic capital market; international reserves; moral hazard; junk ? ? bonds; government bonds; excess demand; private capital markets; stock market indices; capital transactions; capital flow reversals; mixed blessing of capital inflows; individual bond; domestic credit; capital income taxation; financial economics; consumer price index; domestic interest rates; financial contagion; financial system; securities markets; capital income; credit market; junk bond; bond spreads; bond flows; stock prices; stock price; junk ? bond; international capital movements; bond index; short-term capital;

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Citations

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Cited by:
  1. Antonio David, 2009. "Are price-based capital account regulations effective in developing countries?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(26), pages 3375-3388.
  2. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops," NBER Working Papers 10276, National Bureau of Economic Research, Inc.
  3. Alberto Chong & Alejandro Izquierdo & Alejandro Micco & Ugo Panizza, 2003. "Conducción empresarial y flujos de capitales privados hacia América Latina," Research Department Publications, Inter-American Development Bank, Research Department 4324, Inter-American Development Bank, Research Department.
  4. Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011. "Sovereign borrowing by developing countries: What determines market access?," Journal of International Economics, Elsevier, Elsevier, vol. 83(2), pages 243-254, March.
  5. Mody, Ashoka & Taylor, Mark P., 2006. "Regional Vulnerability : The Case of East Asia," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 776, University of Warwick, Department of Economics.
  6. Evrensel, Ayse Y., 2004. "Lending to developing countries revisited: changing nature of lenders and payment problems," Economic Systems, Elsevier, Elsevier, vol. 28(3), pages 235-256, September.
  7. Addison, Tony, 2006. "International Finance and the Developing World: The Next Twenty Years," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2006/09, World Institute for Development Economic Research (UNU-WIDER).
  8. David, Antonio C., 2007. "Revisiting Price-based Controls on Capital Inflows in a "Sophisticated" Emerging Market," World Development, Elsevier, Elsevier, vol. 35(8), pages 1329-1340, August.
  9. Eswar S. Prasad & Kenneth Rogoff & Shang-Jin Wei & M. Ayhan Kose, 2007. "Financial Globalization, Growth and Volatility in Developing Countries," NBER Chapters, National Bureau of Economic Research, Inc, in: Globalization and Poverty, pages 457-516 National Bureau of Economic Research, Inc.
  10. David, Antonio C., 2007. "Controls on capital inflows and external shocks," Policy Research Working Paper Series 4176, The World Bank.
  11. Valpy FitzGerald & Derya Krolzig, 2004. "Modelling the demand for emerging market assets," Money Macro and Finance (MMF) Research Group Conference 2003, Money Macro and Finance Research Group 29, Money Macro and Finance Research Group.
  12. David A. Grigorian, 2003. "On the Determinants of First-Time Sovereign Bond Issues," IMF Working Papers 03/184, International Monetary Fund.
  13. Alberto Chong & Alejandro Izquierdo & Alejandro Micco & Ugo Panizza, 2003. "Corporate Governance and Private Capital Flows to Latin America," Research Department Publications, Inter-American Development Bank, Research Department 4323, Inter-American Development Bank, Research Department.
  14. Valpy FitzGerald & Derya Krolzig, 2003. "Modeling the Demand for Emerging Market Assets," OFRC Working Papers Series, Oxford Financial Research Centre 2003fe10, Oxford Financial Research Centre.
  15. Stanley Watt & Donal McGettigan & Saade Chami, 2007. "Jordan's International Reserve Position," IMF Working Papers 07/103, International Monetary Fund.

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