Crises, Private Capital Flows and Financial Instability in Emerging Asia
Asia was faced with a sudden and sharp crisis in 2008-2009, the proximate cause of which was reversals in foreign capital flows, not unlike the regional crisis a decade ago. How different has this boom and bust cycle of international capital flows been from the previous one? The paper examines the balance of payments dynamics in emerging Asia to understand the magnitude and types of private capital flows to and from the region between 1990 and 2008. Attention is paid to both the crises periods of 1997-1998 as well as 2007-2008 along with the patterns of capital flows pre and post Asian crisis. While the region’s capital reversals in 1997-1998 were due to “other investments,” i.e. short-term bank lending, those in 2008-2009 were largely due to portfolio flows. It is not surprising that these two components are often referred to as “mobile capital” and are seen by many as a source of financial instability in comparison to foreign direct investment (FDI) which is viewed as a more stable form of external finance. However, such a conclusion needs to be tempered somewhat in view of the fact that a greater share of FDI inflows has been in the form of mergers and acquisitions (M&As) as opposed to Greenfield. The paper also discusses selected policy issues relating to liquidity and reserve adequacy, regional cooperation, exchange rate coordination and financial stability.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (66-2) 288-1234
Fax: (66-2) 288-1000
Web page: http://www.unescap.org/Email:
More information through EDIRC
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.:
- Douglas W. Diamond & Philip H. Dybvig, 2000.
"Bank runs, deposit insurance, and liquidity,"
Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Roberto Chang & Andres Velasco, 1998.
"The Asian liquidity crisis,"
98-11, Federal Reserve Bank of Atlanta.
- Jeffrey A. Frankel & Andrew K. Rose, 1996.
"Currency Crashes in Emerging Markets: Empirical Indicators,"
NBER Working Papers
5437, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A & Rose, Andrew K, 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," CEPR Discussion Papers 1349, C.E.P.R. Discussion Papers.
- Jeffrey J. Frankel and Andrew K. Rose., 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," Center for International and Development Economics Research (CIDER) Working Papers C96-062, University of California at Berkeley.
- Rodrik, Dani, 2006.
"The Social Cost of Foreign Exchange Reserves,"
CEPR Discussion Papers
5483, C.E.P.R. Discussion Papers.
- Jeanne, Olivier, 2000. "Foreign currency debt and the global financial architecture," European Economic Review, Elsevier, vol. 44(4-6), pages 719-727, May.
- Rabin Hattari & Ramkishen S. Rajan, 2008. "Trends and Drivers of Bilateral FDI Flows in Developing Asia," Working Papers 112008, Hong Kong Institute for Monetary Research.
- R Portes & H Rey, 2000.
"The Determinants Of Cross-Border Equity Flows,"
CEP Discussion Papers
dp0446, Centre for Economic Performance, LSE.
- Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc.
- Richard Portes & Helene Rey, 2000. "The determinants of cross-border equity flows," LSE Research Online Documents on Economics 20203, London School of Economics and Political Science, LSE Library.
- Richard Portes & Hélène Rey, 2001. "The Determinants of Cross-Border Equity Flows," DELTA Working Papers 2001-08, DELTA (Ecole normale supérieure).
- Portes, Richard & Rey, Hélène, 1999. "The Determinants of Cross-Border Equity Flows," CEPR Discussion Papers 2225, C.E.P.R. Discussion Papers.
- Rajan, Ramkishen, 2009. "Monetary, Investment, and Trade Issues in India," OUP Catalogue, Oxford University Press, number 9780195699951, March.
- Eckes Alfred E. & Bird Graham & Rajan Ramkishen S. & Canterbery E. Ray & Zaman M. Raquibuz & Taskin Fatma & Zaim Osman, 2000. "Global Economy Quarterly, Issue 2," Global Economy Journal, De Gruyter, vol. 1(2), pages 1-109, December.
- Gopalan, Sasidaran & Rajan, Ramkishen. S, 2009. "Financial sector de-regulation in Emerging Asia: Focus on foreign bank entry," MPRA Paper 19592, University Library of Munich, Germany.
- Ramkishen S. Rajan, 2006. "Monetary and Financial Cooperation in Asia : Emerging Trends and Prospects," Finance Working Papers 22125, East Asian Bureau of Economic Research.
- M. Shahidul Islam & Ramkishen S. Rajan, 2011. "Bank lending channel of monetary policy transmission: India and the global financial crisis," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 3(5), pages 557-575.
- Rabin Hattari & Ramkishen S. Rajan, 2009. "Cross-border Mergers and Acquisitions (M&As) in Developing Asia: The Role of Financial Variables," Working Papers 362009, Hong Kong Institute for Monetary Research.
When requesting a correction, please mention this item's handle: RePEc:unt:wpmpdd:wp/09/06. 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: (Macroeconomic Policy and Development Division, ESCAP)
If references are entirely missing, you can add them using this form.