The Capital Inflows Problem: Concepts and Issues

Calvo, Guillermo A.; Leiderman, Leonardo; Reinhart, Carmen

doi:10.1111/j.1465-7287.1994.tb00434.x

Cited by 170 publications

(87 citation statements)

References 6 publications

(6 reference statements)

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“…13 Marini and Piersanti's (2003) study that covered Asian countries found that a rise in current and expected future budget deficits generated appreciation in exchange rates and decumulation of external assets, resulting in a currency crisis when foreign reserves fell to a critical level. Increase in capital inflows increase total reserves and real exchange rates of Latin American countries (Calvo, Leiderman & Reinhart, 1994). Hsiao and Hsiao (2001) found a unidirectional causality from short-term external debt/international reserves ratio to exchange rates in Korea.…”

Section: Loss Of International Reserves and Excessive Foreign Currencmentioning

confidence: 93%

Parity and Non-Parity Determinants of Exchange Rates in Latin American Economies

Ho¹,

Ariff²

2014

Taylor's Bus Rev

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This paper reports how non-parity fundamental factors together with parity factors are correlated with exchange rate movements. Seven Latin American countries were included in this study using a selection criterion that for a pair of countries to be included, the pair must have more than 50 per cent of trade with the group chosen. The econometric methods applied are appropriate to this topic and include pooled time series regression and seemingly unrelated regression. The findings show that there is support for short and long-run effects on exchange rates from inflation and interest rates. We entered non-parity factors suggested in recent research reports as likely determinants of the exchange rates, and found four non-parity factors that are significantly correlated with exchange rates and these served as control variables in our test model. Our main result shows that both inflation and interest rates are jointly significant factors in most of the tests. The results appear to suggest that exchange rate research should include both nonparity and parity factors. Only then would the parity factor effects be identifiable as relevant to exchange rate formation.

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Section: Loss Of International Reserves and Excessive Foreign Currencmentioning

confidence: 93%

Parity and Non-Parity Determinants of Exchange Rates in Latin American Economies

Ho¹,

Ariff²

2014

Taylor's Bus Rev

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“…(See, among others, Corbo and Hernandez, 1994, Calvo, Leiderman and Reinhart, 1994, Fernandez-Arias and Montiel, 1995, Khan and Reinhart, 1995, Spiegel, 1995, and Koenig, 1996.) These studies highlight various possible sideeffects of capital inflows that may occur, in addition to their expected effect of boosting investment and the importation of capital goods:…”

Section: Previous Empirical Work On Capital Inflowsmentioning

confidence: 99%

Capital Inflows, Financial Intermediation, and Aggregate Demand: Empirical Evidence From Mexico and Other Pacific Basin Countries

Kamin

Wood

1997

SSRN Journal

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In trying to explain the balance-of-payments and banking crises of 1994-95 that erupted in Mexico, observers have pointed to various effects of the substantial capital inflows that took place in the preceding half decade. It has been argued that these inflows contributed to rapid monetary growth, real appreciation of the peso, and the widening of Mexico's current account deficit. In addition, by making available credit for consumption loans at a time when investment spending in Mexico was not yet ready to grow rapidly, these inflows may have contributed to the fall in Mexico's savings rate.This paper looks at the effect of capital flows on macroeconomic and financial variables in Mexico during the 1980s and 1990s and compares Mexico's experience with that of a cross-section of Pacific Basin countries. In particular, we attempt to gauge the effect of capital flows on money growth, interest rates, consumption and investment. We do find evidence of an independent effect of capital flows on monetary conditions and domestic demand, controlling for certain other domestic factors. However, these inflows appear not to have altered substantially the basic trajectories of money, consumption, and investment in the recipient countries.

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“…The surge in financial flows to developing countries, as well as the shifts in the composition of these flows, can be broken down into "pull" and "push" factors (Calvo, Leiderman and Reinhart, 1994). These are related to, respectively, (i) policies and other developments in developing countries and (ii) changes in global financial markets.…”

Section: Ii3 Factors Driving Financial Globalizationmentioning

confidence: 99%

“…These include legislation of fiscal limits and greater transparency of public accounts (see Obtfeld, 2007). 46 A number of studies have examined the policy responses to capital inflows focusing mainly on the experience of a few countries during the 1990s (see Calvo, Leiderman, and Reinhart (1994);Fernández-Arias and Montiel (1996); Glick (1998); Montiel (1999); Reinhart and Reinhart (1998);and Edwards (2000)). 47 Their findings provide helpful guidance on what has worked, and not worked, in the past.…”

Section: Vi2 Evidencementioning

confidence: 99%

Financial Globalization and Economic Policies

et al. 2009

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E S ABSTRACT Financial Globalization and Economic Policies *We review the large literature on various economic policies that could help developing economies effectively manage the process of financial globalization. Our central findings indicate that policies promoting financial sector development, institutional quality and trade openness appear to help developing countries derive the benefits of globalization. Similarly, sound macroeconomic policies are an important prerequisite for ensuring that financial integration is beneficial. However, our analysis also suggests that the relationship between financial integration and economic policies is a complex one and that there are unavoidable tensions inherent in evaluating the risks and benefits associated with financial globalization. In light of these tensions, structural and macroeconomic policies often need to be tailored to take into account country specific circumstances to improve the risk-benefit tradeoffs of financial integration. Ultimately, it is essential to see financial integration not just as an isolated policy goal but as part of a broader package of reforms and supportive macroeconomic policies.JEL Classification: F02, F21, F36, F4

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The Capital Inflows Problem: Concepts and Issues

Cited by 170 publications

References 6 publications

Parity and Non-Parity Determinants of Exchange Rates in Latin American Economies

Parity and Non-Parity Determinants of Exchange Rates in Latin American Economies

Capital Inflows, Financial Intermediation, and Aggregate Demand: Empirical Evidence From Mexico and Other Pacific Basin Countries

Financial Globalization and Economic Policies

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