IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Capital Flows and Asset Prices

  • Kosuke Aoki
  • Gianluca Benigno
  • Nobuhiro Kiyotaki

After liberalizing international transactions of financial assets, many countries experience large swings in asset prices, capital flows, and aggregate production. This paper studies how the adjustment to capital account liberalization depends upon the degree of development of a domestic financial system, and why the economy with an underdeveloped financial system may be vulnerable to shocks to the domestic and foreign finance. We construct a model of a small open economy in which it is difficult to enforce debtors to repay their debts unless the debts are secured by collateral, and assets usable as collateral for international borrowing are more restricted than domestic borrowing.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0921.

in new window

Date of creation: Apr 2009
Date of revision:
Handle: RePEc:cep:cepdps:dp0921
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Caballero, Ricardo J & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2006. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," Center for International and Development Economics Research, Working Paper Series qt7xc0g8mm, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  2. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
  3. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development.
  4. Aghion, Philippe & Hart, Oliver & Moore, John, 1992. "The Economics of Bankruptcy Reform," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 523-46, October.
  5. Michael Klein & Giovanni Olivei, 1999. "Capital account liberalization, financial depth, and economic growth," Working Papers 99-6, Federal Reserve Bank of Boston.
  6. John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
  7. Reinhart, Carmen & Kaminsky, Graciela, 2000. "Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
    [The twin crises: Te causes of banking and balance of payments problems]
    ," MPRA Paper 13842, University Library of Munich, Germany.
  8. Seppo Honkapohja & Erkki A. Koskela & Willi Leibfritz & Roope Uusitalo, 2009. "Economic Prosperity Recaptured: The Finnish Path from Crisis to Rapid Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012693, June.
  9. Peter Blair Henry, 2006. "Capital account liberalization: theory, evidence, and speculation," Working Paper Series 2007-32, Federal Reserve Bank of San Francisco.
  10. Kosuke Aoki & Gianluca Benigno & Nobuhiro Kiyotaki, 2010. "Adjusting to Capital Account Liberalization," CEP Discussion Papers dp1014, Centre for Economic Performance, LSE.
  11. repec:cup:cbooks:9780521671798 is not listed on IDEAS
  12. Hart, Oliver & Moore, John, 1994. "A Theory of Debt Based on the Inalienability of Human Capital," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 841-79, November.
  13. Robert G. King & Sergio T. Rebelo, 2000. "Resuscitating Real Business Cycles," RCER Working Papers 467, University of Rochester - Center for Economic Research (RCER).
  14. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2001. "International and domestic collateral constraints in a model of emerging market crises," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 513-548, December.
  15. Fatih Ozatay & Guven Sak, 2003. "Banking Sector Fragility and Turkey’s 2000–01 Financial Crisis," Working Papers 0308, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  16. Guillermo A. Calvo & Ernesto Talvi, 2005. "Sudden Stop, Financial Factors and Economic Collpase in Latin America: Learning from Argentina and Chile," NBER Working Papers 11153, National Bureau of Economic Research, Inc.
  17. Enrique G. Mendoza, 2006. "Endogenous Sudden Stops in a Business Cycle Model with Collateral Constraints:A Fisherian Deflation of Tobin's Q," NBER Working Papers 12564, National Bureau of Economic Research, Inc.
  18. repec:cup:cbooks:9780521633178 is not listed on IDEAS
  19. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0921. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.