What Do Capital Inflows Do? Dissecting the Transmission Mechanism for Thailand, 1980-96

W. Jos Jansen

Macroeconomics from University Library of Munich, Germany

Abstract: This paper examines the effects of private financial (non-FDI) capital inflows in Thailand in the pre-crisis period (1980:I–96:IV). Private capital inflows are found to be associated with higher asset prices, lower lending rates, surges in bank lending and domestic spending driven by higher investment, higher output, modest inflation, and modest real exchange rate appreciation. Inflows are also associated with a greater vulnerability to a liquidity crisis, but not with greater external solvency risk. Current account deficits are temporary, thus sustainable, as exports catch up with higher imports within two years. Consequently, the Thai crisis appears to be more of a liquidity crisis than an external solvency crisis.

Keywords: Asian crisis; capital flows; lending boom; investment boom; transmission mechanism (search for similar items in EconPapers)
JEL-codes: E44 F30 F40 O53 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2003-09-17
New Economics Papers: this item is included in nep-dev, nep-ifn and nep-mfd
Note: Type of Document - PDF; prepared on PC; to print on HP, A4 paper; pages: 47 ; figures: included. Final version, forthcoming in Journal of Macroeconomics
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0309012

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