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The Impact of Capital Inflows on Emerging East Asian Economies: Is Too Much Money Chasing Too Little Good?

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Author Info

  • Kim, Soyoung

    ()
    (Korea University)

  • Yang, Doo Yong

    ()
    (Korea Institute for International Economic Policy)

Abstract

In recent years, emerging East Asian economies have experienced large capital inflows-especially a surge in portfolio inflows-and an appreciation of asset prices such as equities, land, and both nominal and real exchange rates. The paper reviews why a surge in capital inflows can increase asset prices, and then empirically investigates the effects by employing a panel vector autoregression (VAR) model. The empirical results suggest that capital inflows have indeed contributed to the asset price appreciation in this region, although capital inflow shocks explain a relatively small part of asset price fluctuations. How to manage these capital inflows is also discussed.

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Bibliographic Info

Paper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 15.

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Length: 34 pages
Date of creation: 01 May 2008
Date of revision:
Handle: RePEc:ris:adbrei:0015

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Keywords: Capital inflows; portfolio inflows; asset prices;

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Cited by:
  1. Schou-Zibell, Lotte & Madhur, Srinivasa, 2010. "Regulatory Reforms for Improving the Business Environment in Selected Asian Economies - How Monitoring and Comparative Benchmarking Can Provide Incentive for Reform," Working Papers on Regional Economic Integration 40, Asian Development Bank.
  2. McKibbin, Warwick J. & Chanthapun, Waranya Pim, 2009. "Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis," Working Papers on Regional Economic Integration 36, Asian Development Bank.
  3. Eduardo OlaberrĂ­a, 2012. "Capital Inflows and Booms in Assets Prices: Evidence From a Panel of Countries," Working Papers Central Bank of Chile 675, Central Bank of Chile.
  4. Tereso S. Tullao & John Paolo R. Rivera & Mitzie Irene P. Conchada, 2011. "Role of global production networks in understanding the impacts of the macroeconomics stimulus," STUDIES IN TRADE AND INVESTMENT, in: Trade-led growth: A sound strategy for Asia, chapter 4 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  5. Ponomarenko, Alexey, 2013. "Early warning indicators of asset price boom/bust cycles in emerging markets," Emerging Markets Review, Elsevier, vol. 15(C), pages 92-106.
  6. Rigg, Robert & Schou-Zibell, Lotte, 2009. "The Financial Crisis and Money Markets in Emerging Asia," Working Papers on Regional Economic Integration 38, Asian Development Bank.
  7. Madhur, Srinivasa & Wignaraja, Ganeshan & Darjes, Peter, 2009. "Roads for Asian Integration: Measuring ADB's Contribution to the Asian Highway Network," Working Papers on Regional Economic Integration 37, Asian Development Bank.

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