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Equity market and foreign capital

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  • Yoko Furukawa

Abstract

I present a model that demonstrates that the market mechanism is not always effective in stabilizing an open equity market. Foreign capital inflows create multiple equilibria in the equity market, which may simultaneously trigger a currency crisis as well as an equity market crash even if the equity market is well developed.

Suggested Citation

  • Yoko Furukawa, 2009. "Equity market and foreign capital," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 349-358, February.
    • Handle: RePEc:cje:issued:v:42:y:2009:i:1:p:349-358
    DOI: 10.1111/j.1540-5982.2008.01511.x
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    References listed on IDEAS

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    1. Kaminsky, Graciela L. & Reinhart, Carmen M., 2002. "Financial markets in times of stress," Journal of Development Economics, Elsevier, vol. 69(2), pages 451-470, December.
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    5. Chang, Roberto & Velasco, Andres, 2000. "Financial Fragility and the Exchange Rate Regime," Journal of Economic Theory, Elsevier, vol. 92(1), pages 1-34, May.
    6. Hakansson, Nils H., 1999. "The Role of a Corporate Bond Market in an Economy -- and in Avoiding Crises," Research Program in Finance, Working Paper Series qt6sq4c6g0, Research Program in Finance, Institute for Business and Economic Research, UC Berkeley.
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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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