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Surging Capital Flows To Emerging Asia: Facts, Impacts And Responses

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  • RAVI BALAKRISHNAN

    (International Monetary Fund, USA)

  • SYLWIA NOWAK

    (International Monetary Fund, USA)

  • SANJAYA PANTH

    (International Monetary Fund, USA)

  • YIQUN WU

    (International Monetary Fund, USA)

Abstract

Net capital flows to Emerging Asia rebounded at a record pace following the global financial crisis, raising concerns about overheating and financial stability. This paper documents the size and composition of the most recent surge to Asian emerging markets from a historical perspective and compares developments in the broader economy, asset prices, and corporate variables across the different episodes of strong inflows. We find little evidence of a significant build-up of imbalances and resource misallocation during the most recent surge. We also review country experiences in managing the risks associated with inflows and argue that Asian countries have used regulatory measures during past surges.

Suggested Citation

  • Ravi Balakrishnan & Sylwia Nowak & Sanjaya Panth & Yiqun Wu, 2013. "Surging Capital Flows To Emerging Asia: Facts, Impacts And Responses," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(02), pages 1-24.
    • Handle: RePEc:wsi:jicepx:v:04:y:2013:i:02:n:s1793993313500075
    DOI: 10.1142/S1793993313500075
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    1. Levan Efremidze & John Rutledge & Thomas D. Willett, 2016. "Capital Flow Surges As Bubbles: Behavioral Finance And Mckinnon’S Over-Borrowing Syndrome Extended," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(02), pages 1-27, June.
    2. Gunther Schnabl & Kristina Spantig, 2016. "(De)Stabilizing Exchange Rate Strategies In East Asian Monetary And Economic Integration," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(02), pages 1-24, June.
    3. Calderón, César & Kubota, Megumi, 2019. "Ride the Wild Surf: An investigation of the drivers of surges in capital inflows," Journal of International Money and Finance, Elsevier, vol. 92(C), pages 112-136.
    4. Chantapacdepong, Pornpinun & Shim, Ilhyock, 2015. "Correlations across Asia-Pacific bond markets and the impact of capital flow management measures," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 71-101.
    5. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Inflation Targeting and Financial Stability: A Perspective from the Developing World," Working Papers Series 324, Central Bank of Brazil, Research Department.
    6. Gan-Ochir Doojav & Borkhuu Gotovsuren & Tsenddorj Dorjpurev, 2012. "Financial Contagion and Volatile Capital Flows," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ56.
    7. Wenwen Sheng & M. C. Sunny Wong, 2017. "Capital Flow Management Policies and Riskiness of External Liability Structures: the Role of Local Financial Markets," Open Economies Review, Springer, vol. 28(3), pages 461-498, July.
    8. McNelis, Paul D., 2016. "Optimal policy rules at home, crisis and quantitative easing abroad," BOFIT Discussion Papers 15/2016, Bank of Finland Institute for Emerging Economies (BOFIT).
    9. McNelis, Paul D., 2016. "Optimal policy rules at home, crisis and quantitative easing abroad," BOFIT Discussion Papers 15/2016, Bank of Finland, Institute for Economies in Transition.
    10. Tillmann, Peter, 2013. "Capital inflows and asset prices: Evidence from emerging Asia," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 717-729.
    11. Rogelio V. Mercado, 2018. "Not all surges of gross capital inflows are alike," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(2), pages 326-347, May.
    12. Hwee Kwan Chow & Taojun Xie, 2016. "Are House Prices Driven by Capital Flows? Evidence from Singapore," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-21, February.
    13. Ahmet Ihsan Kaya & Lutfi Erden & Ibrahim Ozkan, 2022. "Detecting capital flow surges in developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3510-3530, July.
    14. repec:zbw:bofitp:2016_015 is not listed on IDEAS
    15. Vikram Nehru, 2013. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 49(2), pages 139-166, August.
    16. Sen Gupta, Abhijit & Sengupta, Rajeswari, 2014. "Capital Flows and Capital Account Management in Selected Asian Economies," MPRA Paper 58982, University Library of Munich, Germany.
    17. Hiro Ito & Phuong Tran, 2023. "Emerging Market Economies’ Challenge: Managing the Yield Curve in a Financially Globalized World," Open Economies Review, Springer, vol. 34(1), pages 171-194, February.
    18. Bruno, Valentina & Shim, Ilhyock & Shin, Hyun Song, 2017. "Comparative assessment of macroprudential policies," Journal of Financial Stability, Elsevier, vol. 28(C), pages 183-202.
    19. Nyang`oro Owen, 2017. "Working Paper 285 - Capital Inflows and Economic Growth in Sub-Saharan Africa," Working Paper Series 2409, African Development Bank.
    20. Masyita Crystallin & Levan Efremidze & Sungsoo Kim & Wahyu Nugroho & Ozan Sula & Thomas Willett, 2015. "How Common are Capital Flows Surges? How They are Measured Matters -a Lot," Open Economies Review, Springer, vol. 26(4), pages 663-682, September.
    21. Aftab, Muhammad & Phylaktis, Kate, 2022. "Economic integration and exchange market pressure in a policy uncertain world," Journal of International Money and Finance, Elsevier, vol. 128(C).
    22. Boubekeur Baba & Guven Sevil, 2020. "The behavior of stock market prices throughout the episodes of capital inflows," Papers 2008.13472, arXiv.org.
    23. Muhammad Imran & Abdul Rashid, 2023. "The Empirical Determinants of Foreign Direct Investment Episodes," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(3), pages 409-435, September.
    24. R. Eki Rahman & Ermawati, 2020. "An Analysis Of Herding Behavior In The Stock Market: A Case Study Of The Asean-5 And The United States," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(3), pages 297-318, October.
    25. Puspa D. Amri & Greg M. Richey & Thomas D. Willett, 2016. "Capital Surges and Credit Booms: How Tight is the Relationship?," Open Economies Review, Springer, vol. 27(4), pages 637-670, September.

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