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Cross-Border Investment and the Global Financial Crisis in the Asia-Pacific Region

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  • Sayuri Shirai

    (Faculty of Policy Management at Keio University, Japan)

Abstract

The subprime mortgage crisis erupted in the United States in mid-2007 and was then transformed into the global financial crisis after the failure of Lehman Brothers in September 2008. The total amount of write-downs of loans and securities by financial institutions for 2007-2010 is estimated to reach $1 trillion in the United States, $604 billion in the United Kingdom, and $814 billion in the Euro Area. By contrast, the Asia-Pacific region is expected to have write-downs of only $210 billion, suggesting the limited damages incurred on the banking sector. Nonetheless, the Asia-Pacific region suffered from the global financial crisis through two channels. One channel was mainly through capital withdrawals from equity markets by foreign investors, causing a sharp drop in stock prices. The other channel was through trade linkages with advanced nations. Nearly all countries faced a contraction in exports and production owing to an abrupt decline in import demand in the United States and Europe. This paper analyses how the Asia-Pacific region was affected by the global financial crisis. To do so, the paper focuses on cross-border capital flows and investment patterns by looking at the pre-crisis features of the United States in relation to the world, as well as the Asia-Pacific region. It also focuses on net international investment positions of the Asia-Pacific region in the pre-crisis period. The paper then sheds light on the impact of the global financial crisis on the cross-border capital flows and the balance of payments in the region.

Suggested Citation

  • Sayuri Shirai, 2009. "Cross-Border Investment and the Global Financial Crisis in the Asia-Pacific Region," MPDD Working Paper Series WP/09/04, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    • Handle: RePEc:unt:wpmpdd:wp/09/04
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    References listed on IDEAS

    as
    1. Shirai, Sayuri, 2009. "Evaluating the Present State of Japan as An International Financial Center," MPRA Paper 14720, University Library of Munich, Germany.
    2. Sayuri SHIRAI, 2009. "The Impact of the US Subprime Mortgage Crisis on the World and East Asia: Through Analyses of Cross-border Capital Movements," Working Papers d013, Economic Research Institute for ASEAN and East Asia (ERIA).
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