Abstract
The expansion and contraction of portfolio capital flows and short-term bank lending from OECD countries in emerging markets during the past decade has generated a large and controversial body of literature. Most of the debate has focused on the effect of these flows on emerging markets themselves, and on the effect of host country policies on the attraction or retention of the flows. However the process by which credit providers and portfolio investors make their decisions is much more than simply deciding to supply a specific amount of capital to emerging markets at a given average risk and price, and then to allocate this between individual emerging markets according to local risk and return characteristics — the so-called ‘fundamentals’.
Earlier versions of this chapter were presented to the WIDER/ECLAC seminars on ‘Capital Flows to Emerging Markets since the Asian Crisis’ in Santiago de Chile (8–9 March 2001) and Helsinki (1–18 October 2001). I would like to thank colleagues at these seminars for their critical yet constructive comments.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Agenor, P-R. (1998) ‘The Surge in Capital Flows: Analysis of Push and Pull Factors’, International Journal Finance and Economics, 3: 39–57.
Atkinson, A. B. and J. E. Stiglitz (1980) Lectures on Public Economics, New York: McGraw-Hill.
Blinder, A. S. (1987) ‘Credit Rationing and Effective Supply Failures’, Economic Journal, 97: 327–52.
Brennan, M. J. and H. H. Cao (1997) ‘International Portfolio Investment Flows’, Journal of Finance, 52: 1851–80.
Calvo, G. A., L. Leiderman and C. M. Reinhart (1993) ‘Capital Flows and Real Exchange Rate Appreciation in Latin America’, IMF Staff Papers, 40, 1: 108–51.
Caouette, J. B., E. I. Altman and P. Narayan (1998) Managing Credit Risk: The Next Great Financial Challenge, New York: Wiley.
Clark, E., M. Levasseu, and P. Rousseau (1993) International Finance, London: Chapman and Hall.
Cunningham, A., L. Dixon and S. Hayes (2001) ‘Analysing Yield Spreads on Emerging Market Sovereign Bonds’, Bank of England Financial Stability Review, December: 175–86.
Davis, E. P. (1995) Pension Funds: Retirement-Income Security and Capital Markets, Oxford: Clarendon Press.
De Grauwe, P. (1996) International Money, 2nd edn, Oxford: Oxford University Press.
Devenow, A. and I. Welck (1996) ‘Rational Herding in Financial Economics’, European Economic Review, 40: 603–15.
Disyatat, P. and R. G. Gelos (2001) ‘The Asset Allocation of Emerging Market Funds’, IMF Working Paper WP/01/11, Washington, DC: IMF, August.
Dumas, B. (1994) ‘Partial Equilibrium Versus General Equilibrium Models of the International Capital Market’, in F. van der Ploeg (ed.), The Handbook of International Macroeconomics, Oxford: Blackwell, 301–34.
Fernanadez-Arias, E. (1996) ‘The New Wave of Private Capital Flows: Push or Pull’, Journal of Development Economics, 48, 2: 389–418.
Frankel, J. and S. Schmukler (1996) ‘Country Fund Discounts, Asymmetric Information and the Mexican Crisis of 1994: Did Local Investors Turn Pessimistic Before International Investors?’, NBER Working Paper no. 5714, Cambridge, MA: NBER.
Gehrig, T. (1993) ‘An Information Based Explanation of the Domestic Bias in International Equity Investment’, Scandinavian Journal of Economics, 21: 97–109.
Goodhart, C., P. Hartmann, D. Llewellyn, L. Rojas-Suarez and S. Weisbrod (1998) Financial Regulation, London: Routledge in association with the Bank of England.
Hiller, B. (1997) The Economics of Asymmetric Information, Basingstoke: Macmillan.
International Monetary Fund (IMF) (1992–1999) International Capital Markets: Developments, Problems and Key Policy Issues, Washington, DC: IMF.
— (1995) Private Market Financing for Developing Countries, Washington, DC: IMF.
— (2000) World Economic Outlook, Washington, DC: IMF, May.
— (2001) Emerging Market Financing, Washington, DC: IMF, November.
Kahneman, D., P. Slovic and A. Tversky (1982) Judgement Under Uncertainty: Heuristics and Biases, Cambridge: Cambridge University Press.
Kaminsky, G., R. K. Lyons and S. Schmukler (2000a) ‘Managers, Investors and Crises: Mutual Fund Strategies in Emerging Markets’, NBER Working Paper no. 7855, Cambridge, MA: NBER.
— and — (2000b) ‘Mutual Fund Investment in Emerging Markets: An Overview’, World Bank Economic Review, 15, 2: 315–40.
Kang, J-K. and R. M. Stulz (1994) ‘Why is There a Home Bias? An Analysis of Foreign Portfolio Equity Ownership in Japan’, Journal of Financial Economics, 46: 3–28.
Kim, W. and S-J. Wei (1999) ‘Foreign Portfolio Investors Before and During a Crisis’, NBER Working Paper no. 6968, Cambridge, MA: NBER.
Kumar, M. S. and A. Persaud (2001) ‘Pure Contagion and Investors Shifting Risk Appetite: Analytical Issues and Empirical Evidence’, IMF Working Paper 01/134, Washington, DC: IMF.
Lane, P. and G. M. Lilesi-Ferretti (1999) ‘The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries’, IMF Working Paper 99/115, Washington, DC: IMF.
Luttick, J. (1998) Accounting for the Global Economy: Measuring World Trade and Investment Linkages, Basingstoke: Macmillan.
Mankiw, N. G. (1986) ‘The Allocation of Credit and Financial Collapse’, Quarterly Journal of Economics, 101: 455–70.
Mody, A. and M. P. Taylor (2001) ‘International Capital Crunches: The Time-Varying Role of Informational Strategies’, IMF Working Paper 02/43, Washington, DC: IMF.
Montiel, P. and C. M. Reinhart (2001) ‘The Dynamics of Capital Movements in Emerging Economies During the 1990s’, in S. Griffith-Jones, M. F. Montes and A. Nasution (eds), Short-term Capital Flows and Economic Crises, Oxford: Oxford University Press for UNU/WIDER, 3–28.
OECD (2001) Survey of Investment Regulation of Pension Funds, Paris: OECD.
Razin, A., E. Sadka and C. W. Yuen (1998) ‘A Pecking Order of Capital Inflow and International Tax Principles’, Journal of Internaional Economics, 44: 45–68.
Stiglitz, J. and A. Weiss (1992) ‘Asymmetric Information in Credit Markets and its Implications for Macroeconomics’, Oxford Economic Papers, 44.
Tobin, J. (1998) Money Credit and Capital, New York: McGraw-Hill.
World Bank (2000) ‘Global Development Finance 2000’, Washington, DC: World Bank.
Editor information
Editors and Affiliations
Copyright information
© 2003 United Nations University
About this chapter
Cite this chapter
FitzGerald, V. (2003). The Instability of the Emerging-Market Assets Demand Schedule. In: Ffrench-Davis, R., Griffith-Jones, S. (eds) From Capital Surges to Drought. Studies in Development Economics and Policy. Palgrave Macmillan, London. https://doi.org/10.1057/9781403990099_11
Download citation
DOI: https://doi.org/10.1057/9781403990099_11
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-51272-0
Online ISBN: 978-1-4039-9009-9
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)