What Do Capital Inflows Do? Dissecting the Transmission Mechanism for Thailand, 1980-96
AbstractThis 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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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0309012.
Length: 47 pages
Date of creation: 17 Sep 2003
Date of revision:
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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Asian crisis; capital flows; lending boom; investment boom; transmission mechanism;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F30 - International Economics - - International Finance - - - General
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-DEV-2003-09-24 (Development)
- NEP-IFN-2003-09-24 (International Finance)
- NEP-MFD-2003-09-24 (Microfinance)
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