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Sailing through this Storm? Capital Flows in Asia during the Crisis

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  • Cedric TILLE

    (Graduate Institute of International and Development Studies and Centre for Economic Policy Research and Hong Kong Institute for Monetary Research)

Abstract

The current crisis has led to an unprecedented collapse in international capital flows, with substantial heterogeneity across regions. Asian economies were relatively unaffected, despite having been the center of the storm in the crisis of the late 1990s. The contraction in capital flows for Asian countries was limited to the most acute phase of the crisis following the collapse of Lehman Brothers, after which capital flows rebounded. We find that the stronger performance of Asia primarily reflects its more limited reliance on international banking compared to Europe and the United States. We find little evidence that the drivers of capital flows had a differentiated impact in Asia. Finally, we show that while higher initial levels of foreign reserves did not insulate countries from a turnaround in private capital flows, a larger use of reserves at the height of the crisis limited the contraction in gross private outflows.

Suggested Citation

  • Cedric TILLE, 2011. "Sailing through this Storm? Capital Flows in Asia during the Crisis," Working Papers 202011, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:202011
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    References listed on IDEAS

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    1. Steven B. Kamin & Laurie Pounder Demarco, 2010. "How did a domestic housing slump turn into a global financial crisis?," International Finance Discussion Papers 994, Board of Governors of the Federal Reserve System (U.S.).
    2. Gian‐Maria Milesi‐Ferretti & Cédric Tille, 2011. "The great retrenchment: international capital flows during the global financial crisis," Economic Policy, CEPR;CES;MSH, vol. 26(66), pages 285-342, April.
    3. Linda S. Goldberg & Craig Kennedy & Jason Miu, 2011. "Central bank dollar swap lines and overseas dollar funding costs," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 3-20.
    4. Nicola Cetorelli & Linda S Goldberg, 2011. "Global Banks and International Shock Transmission: Evidence from the Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(1), pages 41-76, April.
    5. Zhiwei Zhang & Wenlang Zhang & Gaofeng Han, 2009. "How Does the US Credit Crisis Affect the Asia-Pacific Economies? --- Analysis based on a General Equilibrium Model," Working Papers 0912, Hong Kong Monetary Authority.
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    Cited by:

    1. Yamamoto, Shugo, 2014. "Transmission of US financial and trade shocks to Asian economies: Implications for spillover of the 2007–2009 US financial crisis," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 88-103.
    2. Tillmann, Peter, 2013. "Capital inflows and asset prices: Evidence from emerging Asia," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 717-729.
    3. Narendar Rao & K. Reddy, 2015. "The impact of the global financial crisis on cross-border mergers and acquisitions: a continental and industry analysis," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 309-341, December.

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    Keywords

    International Capital Flows; Banking Integration; Crisis;

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