The Impact of Capital Inflows on Emerging East Asian Economies: Is Too Much Money Chasing Too Little Good?
AbstractIn 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 InfoPaper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 15.
Length: 34 pages
Date of creation: 01 May 2008
Date of revision:
Capital inflows; portfolio inflows; asset prices;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-20 (All new papers)
- NEP-CBA-2008-09-20 (Central Banking)
- NEP-IFN-2008-09-20 (International Finance)
- NEP-MON-2008-09-20 (Monetary Economics)
- NEP-SEA-2008-09-20 (South East Asia)
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