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Corruption, Composition of Capital Flows and Currency Crises

2000 Bank loans
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Release : 2000
Genre : Bank loans
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Book Synopsis Corruption, Composition of Capital Flows and Currency Crises by : Shang-Jin Wei

Download or read book Corruption, Composition of Capital Flows and Currency Crises written by Shang-Jin Wei. This book was released on 2000. Available in PDF, EPUB and Kindle. Book excerpt: Corruption affects the composition of capital inflows in a way that may raise the likelihood of a currency crisis.

Corruption, Composition of Capital Flows, and Currency Crises

2016
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Release : 2016
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Book Synopsis Corruption, Composition of Capital Flows, and Currency Crises by : Shang-Jin Wei

Download or read book Corruption, Composition of Capital Flows, and Currency Crises written by Shang-Jin Wei. This book was released on 2016. Available in PDF, EPUB and Kindle. Book excerpt: Corruption affects the composition of capital inflows in a way that may raise the likelihood of a currency crisis.Crony capitalism and international creditors' self-fulfilling expectations are often suggested as rival explanations for currency crises. A possible link between the two has not been explored.Wei shows one channel through which crony capitalism can increase the chance of a currency/financial crisis by altering the composition of capital inflows.Using data on bilateral foreign direct investment and bilateral bank loans, Wei finds clear evidence that in corrupt countries the composition of capital inflows is relatively light in foreign direct investment.Earlier studies indicated that a country with a capital inflow structure is more likely to run into a currency crisis down the road (partly through international creditors' self-fulfilling expectations).Therefore, crony capitalism, through its effect on the composition of a country's capital inflows, makes the country more vulnerable to currency crises brought about by self-fulfilling expectations. Corruption may also weaken domestic financial supervision, with a subsequent deterioration in the quality in banks' and firms' balance sheets.This paper - a product of Public Economics, Development Research Group - is part of a larger effort in the group to understand the connection between corruption and international capital flows. This study was supported in part by a grant from the OECD Development Center. The author may be contacted at [email protected].

Negative Alchemy?

2001 Capital movements
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Release : 2001
Genre : Capital movements
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Book Synopsis Negative Alchemy? by : Shang-Jin Wei

Download or read book Negative Alchemy? written by Shang-Jin Wei. This book was released on 2001. Available in PDF, EPUB and Kindle. Book excerpt: Crony capitalism and self-fulfilling expectations by international creditors are often suggested as two rival explanations for currency crisis. This paper examines a possible linkage between the two that has not been explored much in the literature: corruption may affect a country's composition of capital inflows in a way that makes it more likely to experience a currency crisis that is triggered/aided by a sudden reversal of international capital flows. We find robust evidence that poor public governance is associated with a higher loan-to-FDI ratio. Such a composition of capital flows has been identified as being associated with a higher incidence of a currency crisis. We also find some weaker evidence that poor public governance is associated with a country's inability to borrow internationally in its own currency. The latter is also associated with a higher incidence of a currency crisis. To sum up, even though crony capitalism does not forecast the timing of a crisis, it can nevertheless increase its likelihood. This paper illustrates a particular channel through which this can happen.

Negative Alchemy?

2000
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Release : 2000
Genre :
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Book Synopsis Negative Alchemy? by :

Download or read book Negative Alchemy? written by . This book was released on 2000. Available in PDF, EPUB and Kindle. Book excerpt:

Preventing Currency Crises in Emerging Markets

2002-11-15 Business & Economics
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Release : 2002-11-15
Genre : Business & Economics
Kind : eBook
Book Rating : 944/5 ( reviews)

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Book Synopsis Preventing Currency Crises in Emerging Markets by : Sebastian Edwards

Download or read book Preventing Currency Crises in Emerging Markets written by Sebastian Edwards. This book was released on 2002-11-15. Available in PDF, EPUB and Kindle. Book excerpt: Economists and policymakers are still trying to understand the lessons recent financial crises in Asia and other emerging market countries hold for the future of the global financial system. In this timely and important volume, distinguished academics, officials in multilateral organizations, and public and private sector economists explore the causes of and effective policy responses to international currency crises. Topics covered include exchange rate regimes, contagion (transmission of currency crises across countries), the current account of the balance of payments, the role of private sector investors and of speculators, the reaction of the official sector (including the multilaterals), capital controls, bank supervision and weaknesses, and the roles of cronyism, corruption, and large players (including hedge funds). Ably balancing detailed case studies, cross-country comparisons, and theoretical concerns, this book will make a major contribution to ongoing efforts to understand and prevent international currency crises.

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