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The Impact of Capital Inflows on Emerging East Asian Economies: Is Too Much Money Chasing Too Little Good?

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  • The Impact of Capital Inflows on Emerging East Asian Economies: Is Too Much Money Chasing Too Little Good?
  • Asian Development Bank (ADB)


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Title The Impact of Capital Inflows on Emerging East Asian Economies: Is Too Much Money Chasing Too Little Good?
Similar Titles
Material Type Reports
Publisher

Asian Development Bank (ADB)

Date 2008
Series Title; No Regional Economic Integration Working Papers
Language English
File Type Link
Subject Economy < Financial Policy

Abstract

In recent years, emerging East Asian economies have experienced large capital inflows-especially a surge in portfolio inflows-and an appreciation of asset prices such as equities, land, and both nominal and real exchange rates. The paper reviews why a surge in capital inflows can increase asset prices, and then empirically investigates the effects by employing a panel vector autoregression (VAR) model. The empirical results suggest that capital inflows have indeed contributed to the asset price appreciation in this region, although capital inflow shocks explain a relatively small part of asset price fluctuations. How to manage these capital inflows is also discussed.