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What Do Capital Inflows Do? Dissecting the Transmission Mechanism for Thailand, 1980-96

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Author Info

  • W. Jos Jansen

    (De Nederlandsche Bank)

Abstract

This paper examines the effects of private financial (non-FDI) capital inflows in Thailand in the pre-crisis period (1980:I–96:IV). Private capital inflows are found to be associated with higher asset prices, lower lending rates, surges in bank lending and domestic spending driven by higher investment, higher output, modest inflation, and modest real exchange rate appreciation. Inflows are also associated with a greater vulnerability to a liquidity crisis, but not with greater external solvency risk. Current account deficits are temporary, thus sustainable, as exports catch up with higher imports within two years. Consequently, the Thai crisis appears to be more of a liquidity crisis than an external solvency crisis.

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File URL: http://128.118.178.162/eps/mac/papers/0309/0309012.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0309012.

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Length: 47 pages
Date of creation: 17 Sep 2003
Date of revision:
Handle: RePEc:wpa:wuwpma:0309012

Note: Type of Document - PDF; prepared on PC; to print on HP, A4 paper; pages: 47 ; figures: included. Final version, forthcoming in Journal of Macroeconomics
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Web page: http://128.118.178.162

Related research

Keywords: Asian crisis; capital flows; lending boom; investment boom; transmission mechanism;

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References

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Citations

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Cited by:
  1. Massimiliano Pisani, 2011. "Financial Openness and Macroeconomic Instability in Emerging Market Economies," Open Economies Review, Springer, vol. 22(3), pages 501-532, July.
  2. Ahmad Zubaidi Baharumshah & Hamizun Bin Ismail, 2012. "The present value model and Thailand's current account balance," Journal of Economic Studies, Emerald Group Publishing, vol. 39(3), pages 337-355, December.
  3. Dizaji, S.F. & van Bergeijk, P.A.G., 2012. "Early phase success and long run failure of economic sanctions. With an application to Iran," ISS Working Papers - General Series 544, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

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