Real Estate Speculation as a Source of Banking and Currency Instability: Lessons from the Asian Crisis
A central feature of the Asian currency crisis was the vast prior capital inflow into the region, and the later rapid reversal of that movement. In seeking to explain why this outflow of capital took place and was so devastating for the countries concerned, various writers have laid blame upon a combination of connected lending, poor bank supervision, moral hazard and Â“crony capitalismÂ”. Our emphasis is different. Much of the capital inflow financed a vast over-expansion of commercial real estate development. Plunging real estate values accompanied by severe difficulties in the banking and financial sector have been common occurrences across the region. The argument is that large international portfolio capital flows mediated by banks will usually lead to rapidly appreciating asset prices which will result in banking/currency crises.
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- Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1994.
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Contemporary Economic Policy,
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"El problema de la afluencia de capital: Conceptos y temas
[The Capital Inflows Problem: Concepts and Issues]," MPRA Paper 13682, University Library of Munich, Germany.
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IMF Working Papers
- Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
- Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany.
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