Sailing through this Storm? Capital Flows in Asia during the Crisis

Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 20/2011

Pacific Economic Review, Volume 17, Issue 3, pages 467–488, August 2012

50 Pages Posted: 27 Jul 2011 Last revised: 21 Jul 2022

Date Written: July 27, 2011

Abstract

This working paper was written by Cédric Tille (Graduate Institute of International and Development Studies and Centre for Economic Policy Research).

The current crisis has led to an unprecedented collapse in international capital flows, with substantial heterogeneity across regions. Asian economies were relatively unaffected, despite having been the center of the storm in the crisis of the late 1990s. The contraction in capital flows for Asian countries was limited to the most acute phase of the crisis following the collapse of Lehman Brothers, after which capital flows rebounded. We find that the stronger performance of Asia primarily reflects its more limited reliance on international banking compared to Europe and the United States. We find little evidence that the drivers of capital flows had a differentiated impact in Asia. Finally, we show that while higher initial levels of foreign reserves did not insulate countries from a turnaround in private capital flows, a larger use of reserves at the height of the crisis limited the contraction in gross private outflows.

Keywords: International Capital Flows, Banking Integration, Crisis

Suggested Citation

Institute for Monetary and Financial Research, Hong Kong, Sailing through this Storm? Capital Flows in Asia during the Crisis (July 27, 2011). Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 20/2011, Pacific Economic Review, Volume 17, Issue 3, pages 467–488, August 2012, Available at SSRN: https://ssrn.com/abstract=1895973 or http://dx.doi.org/10.2139/ssrn.1895973

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