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Capital flows to emerging markets: Liberalization, overshooting and volatility (a comment)

Author

Listed:
  • Reinhart, Carmen

Abstract

Comment on: Philiippe Bachetta and Eric Van Wincoop, who in this paper aim is to assess the impact of financial liberalization in emerging markets on the dynamics of capital flows to these countries. By positing a cost of absorbing these flows, the authors explain how liberalization can give rise to an “overshooting” of capital inflows and asset prices. In addition, the authors examine whether incomplete information can give rise to a high degree of volatility in capital flows as well as to contagion. They also suggest that deviations in capital inflows from their steady-state levels can be used as a potential signal of future crises.

Suggested Citation

  • Reinhart, Carmen, 2000. "Capital flows to emerging markets: Liberalization, overshooting and volatility (a comment)," MPRA Paper 13203, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13203
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    References listed on IDEAS

    as
    1. Kaminsky, Graciela L & Reinhart, Carmen M, 1998. "Financial Crises in Asia and Latin America: Then and Now," American Economic Review, American Economic Association, vol. 88(2), pages 444-448, May.
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    3. Edwards, Sebastian & Vegh, Carlos A., 1997. "Banks and macroeconomic disturbances under predetermined exchange rates," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 239-278, October.
    4. Montiel, Peter & Reinhart, Carmen M., 1999. "Do capital controls and macroeconomic policies influence the volume and composition of capital flows? Evidence from the 1990s," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 619-635, August.
    5. Ilan Goldfajn & Rodrigo Valdés, 1997. "Balance of Payments Crises and Capital Flows: The Role of Liquidity," Working Papers Central Bank of Chile 11, Central Bank of Chile.
    6. 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.
    7. Ronald I. McKinnon & Huw Pill, 1996. "Credible Liberalizations and International Capital Flows: The "Overborrowing Syndrome"," NBER Chapters,in: Financial Deregulation and Integration in East Asia, NBER-EASE Volume 5, pages 7-50 National Bureau of Economic Research, Inc.
    8. Vicente Galbis, 1993. "High Real Interest Rates Under Financial Liberalization; Is there a Problem?," IMF Working Papers 93/7, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Capital flows liberalization investment volatility asset price bubbles;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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