Advanced Search
MyIDEAS: Login to save this paper or follow this series

Capital Flows and Economic Fluctuations

Contents:

Author Info

  • Yong Sarah Zhou
Registered author(s):

    Abstract

    This paper uses a general equilibrium model to examine the central role played by commercial banks in intermediating and amplifying the capital flow shocks to the local economy in the 1997 Asia financial crisis. It finds that a sudden stop of capital inflows affects the equilibrium credit supply through two channels: first, the plunge of foreign financing decreases the loanable funds directly; and second the sudden stop drives up the cost of providing banking services, thereby additionally reducing the available bank credit to firms through a "deposit run". Empirical results from a VAR model broadly support the theoretical implications.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21600
    Download Restriction: no

    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/12.

    as in new window
    Length: 30
    Date of creation: 01 Jan 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/12

    Contact details of provider:
    Postal: International Monetary Fund, Washington, DC USA
    Phone: (202) 623-7000
    Fax: (202) 623-4661
    Email:
    Web page: http://www.imf.org/external/pubind.htm
    More information through EDIRC

    Order Information:
    Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

    Related research

    Keywords: Capital flows; Financial intermediation; Bank credit; Employment; banking; capital inflows; bank lending; private capital flows; capital flow; capital outflow; capital outflows; banking sector; banking system; private capital; banking services; foreign bonds; reserve requirement; foreign capital; international capital markets; capital markets; capital mobility; demand deposit; domestic credit; international capital; foreign capital inflows; banking costs; credit market; bank credits; working capital; foreign capital flows; bank loans; var model; banking crises; bank financing; private inflows; international capital inflows; banks ? balance sheets; debt securities; reserve ratio; retained earnings; capital controls; banking regulation; stock market; banks ? balance sheet; bank runs; moral hazard; expenditure on consumption; bank for international settlements; banking institutions; inflation rate; balance sheet effect; monetary authority; foreign asset; banking risk; banking crisis;

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 2001. "A Corporate Balance-Sheet Approach to Currency Crises," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP), Université de Lausanne, Faculté des HEC, DEEP 01.14, Université de Lausanne, Faculté des HEC, DEEP.
    2. Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander, 1999. "Contagion, bank lending spreads, and output fluctuations," Policy Research Working Paper Series 2186, The World Bank.
    3. Edwards, Sebastian & Vegh, Carlos A., 1997. "Banks and macroeconomic disturbances under predetermined exchange rates," Journal of Monetary Economics, Elsevier, Elsevier, vol. 40(2), pages 239-278, October.
    4. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers, C.V. Starr Center for Applied Economics, New York University 95-15, C.V. Starr Center for Applied Economics, New York University.
    5. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 2004. "Financial Development and the Instability of Open Economies," NBER Working Papers 10246, National Bureau of Economic Research, Inc.
    6. By James Morsink & Tamim Bayoumi, 2001. "A Peek Inside the Black Box: The Monetary Transmission Mechanism in Japan," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 2.
    7. Roberto Chang & Andres Velasco, 1998. "Financial crises in emerging markets: a canonical model," Working Paper, Federal Reserve Bank of Atlanta 98-10, Federal Reserve Bank of Atlanta.
    8. Menzie D. Chinn & Kenneth M. Kletzer, 1999. "International capital inflows, domestic financial intermediation and financial crises under imperfect information," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Sep.
    9. Mishkin, Frederic S., 1999. "Lessons from the Asian crisis," Journal of International Money and Finance, Elsevier, Elsevier, vol. 18(4), pages 709-723, August.
    10. Mark Gertler & Simon Gilchrist & Fabio M. Natalucci, 2007. "External Constraints on Monetary Policy and the Financial Accelerator," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 39(2-3), pages 295-330, 03.
    11. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
    12. Eichengreen, Barry & Arteta, Carlos, 2000. "Banking Crises in Emerging Markets: Presumptions and Evidence," Center for International and Development Economics Research, Working Paper Series, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkele qt3pk9t1h2, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    13. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2000. "A simple model of monetary policy and currency crises," European Economic Review, Elsevier, Elsevier, vol. 44(4-6), pages 728-738, May.
    14. Robert Dekle & Kenneth Kletzer, 2002. "Domestic Bank Regulation and Financial Crises: Theory and Empirical Evidence from East Asia," NBER Chapters, National Bureau of Economic Research, Inc, in: Preventing Currency Crises in Emerging Markets, pages 507-558 National Bureau of Economic Research, Inc.
    15. Aaron Tornell & Frank Westermann, 2002. "The Credit Channel in Middle Income Countries," NBER Working Papers 9355, National Bureau of Economic Research, Inc.
    16. Kenneth Kletzer & Robert Dekle, 2001. "Domestic Bank Regulation and Financial Crises," IMF Working Papers 01/63, International Monetary Fund.
    17. Graciela L. Kaminsky & Carmen M. Reinhart, 2001. "Bank Lending and Contagion: Evidence from the Asian Crisis," NBER Chapters, National Bureau of Economic Research, Inc, in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, NBER-EASE Volume 10, pages 73-99 National Bureau of Economic Research, Inc.
    18. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
    19. Richard J. Herring & Nathporn Chatusripitak, 2000. "The Case of the Missing Market: The Bond Market and Why It Matters for Financial Development," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 01-08, Wharton School Center for Financial Institutions, University of Pennsylvania.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:08/12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.