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The Impact of Capital Inflows on Emerging East Asian Economies: Is Too Much Money Chasing Too Little Good?

  • Kim, Soyoung

    ()

    (Korea University)

  • Yang, Doo Yong

    ()

    (Korea Institute for International Economic Policy)

In recent years, emerging East Asian economies have experienced large capital inflows-especially a surge in portfolio inflows-and an appreciation of asset prices such as equities, land, and both nominal and real exchange rates. The paper reviews why a surge in capital inflows can increase asset prices, and then empirically investigates the effects by employing a panel vector autoregression (VAR) model. The empirical results suggest that capital inflows have indeed contributed to the asset price appreciation in this region, although capital inflow shocks explain a relatively small part of asset price fluctuations. How to manage these capital inflows is also discussed.

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Paper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 15.

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Length: 34 pages
Date of creation: 01 May 2008
Date of revision:
Handle: RePEc:ris:adbrei:0015
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  19. Soyoung Kim & Sunghyun Henry Kim & Yunjong Wang, 2004. "Macroeconomic Effects of Capital Account Liberalization: the Case of Korea," Review of Development Economics, Wiley Blackwell, vol. 8(4), pages 624-639, November.
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