Liquidity Black Holes: Why Modern Financial Regulation in Developed Countries is Making Short-Term Capital Flows to Developing Countries Even More Volatile

Abstract

i n a s s o c ia t io n w i t h t h e U n i t e d N a t i o n s U n i v e r s i t y / W o r ld In s t it u t e f o r D e v e l o p m e n t E c o n o m i c s R e s e a rc h Studies in Development Economics and Policy G e n e r a l E d ito r : A n t h o n y S h o r r o c k s U N U W O R L D I N S T I T U T E F O R D E V E L O P M E N T E C O N O M I C S R E S E A R C H ( U N U / W I D E R ) w a s e s t a b lis h e d b y t h e U n i t e d N a t i o n s U n i v e r s i t y a s its firs tre s e a rc h a n d t r a i n i n g c e n tre a n d s ta rt e d w o r k i n H e ls in k i, F in la n d , i n 1 9 8 5 . T h e p u r p o s e o f t h e in s t it u t e is t o u n d e r t a k e a p p li e d re s e a rc h a n d p o li c y a n a ly s i s o n s t r u c t u r a l c h a n g e s a f f e c t in g d e v e lo p i n g a n d t r a n s i t io n a l e c o n o m ie s , t o p r o v id e a f o r u m f o r t h e a d v o c a c y o f p o lic ie s le a d i n g t o r o b u s t,e q u it a b le a n d e n v i r o n m e n t a l l y s u s t a in a b le g r o w t h , a n d t o p r o m o t e c a p a c it ys t r e n g t h e n i n g a n d t r a i n i n g i n t h e f ie ld o f e c o n o m i c a n d s o c ia l p o li c y -m a k i n g . It s w o r k is c a r rie d o u t b y s ta f f re se a rc h e rs a n d v i s i t i n g s c h o la r s i n H e l s i n k i a n d v i a n e t w o r k s o f c o l la b o r a t i n g s c h o la r s a n d i n s t i t u t i o n s a r o u n d t h e w o r ld . UNU World Institute for D evelopm ent Economics Research (UNU/WIDER) Katajanokanlaituri 6B, F IN -00160 Helsinki, FinlandTitles include: R ic a r d o F f r e n c h -D a v i s a n d S t e p h a n y G r if f it h -J o n e s (editors) F R O M C A P I T A L S U R G E S T O D R O U G H T S e e k in g S t a b il i t y f o r E m e r g i n g E c o n o m i e s A i g u o L u a n d M a n u e l F. M o n t e s (editors) P O V E R T Y , I N C O M E D I S T R I B U T I O N A N D W E L L -B E I N G I N A S I A D U R I N G T H E T R A N S I T I O N R o b e r t J. M c I n t y r e a n d B r u n o D a l l a g o (editors) S M A L L A N D M E D I U M E N T E R P R IS E S I N T R A N S I T I O N A L E C O N O M I E S V l a d i m i r M i k h a l e v (editor) I N E Q U A L I T Y A N D S O C I A L S T R U C T U R E D U R I N G T H E T R A N S I T I O N E. W a y n e N a f z ig e r a n d R a i m o V â y r y n e n (editors) T H E P R E V E N T I O N O F H U M A N I T A R I A N E M E R G E N C I E S L a i x i a n g S u n (editor) O W N E R S H I P A N D G O V E R N A N C E O F E N T E R P R IS E S R e c e n t In n o v a t i v e D e v e l o p m e n t sS tu d ie s i n D e v e lo p m e n t E c o n o m ic s a n d P o lic y S eries S ta n d in g O r d e r ISBN 0 -3 3 3 -9 6 4 2 4 -1 (outside North America only)You c a n receive fu tu re title s i n th is series as th e y are p u b lis h e d b y p la c in g a s ta n d in g order. Please c o n ta c t y o u r b o o k seller or, in case o f difficulty, w rite to u s a t th e a d d re ss b e lo w w ith y o u r n a m e a n d address, th e title o f th e series a ...

International Financial Volatility

“…As Persaud (2002) points out, the intrinsic problem with market-sensitive risk management systems is that they incorrectly assume banks act independently. In fact, the decisions of banks are interconnected.…”