Currency crises in emerging markets : Capital flows and herding behaviour

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dc.contributor Bank of Finland Komulainen, Tuomas 2014-09-22T08:00:34Z 2014-09-22T08:00:34Z 2001
dc.identifier.isbn 951-686-803-7
dc.identifier.issn 1456-4564
dc.description.abstract This study shows that due to herding behaviour and possible capital outflows, emerging market countries are vulnerable to multiple equilibria situations and currency crises.It uses a model by Jeanne (1997), where currency crises can be formed by multiple equilibria and self-fulfilling expectations.We determine the country fundamentals according to balance of payments approach.In this study we introduce capital flows, which depend from crisis probability, into the model.The capital flows are further assumed to follow herding behaviour, which produces a reason and mechanism for the large capital outflows witnessed during the recent crises. The range of country fundamentals, where self-fulfilling crises are possible, is now larger than without capital flows and herding behaviour.Consequently, the country fundamentals have to be better, if the country wants to stay totally out of crises.The model further points out lender interdependence as one shortcoming in the current structure of international capital markets.An empirical application of the model to the Mexican and Asian crises shows that when the possible capital outflows are included, the fundamentals of most emerging market countries were inside the range of multiple equilibria in 1994 and 1996, and so self-fulfilling crises were possible.
dc.format.extent 57 s.
dc.language.iso eng
dc.relation.ispartofseries BOFIT Discussion Papers
dc.subject valuuttakurssit
dc.subject mallit
dc.subject Aasia
dc.subject Meksiko
dc.subject kehittyvät markkinat
dc.subject kriisit
dc.subject pääomaliikkeet
dc.subject SP
dc.subject Bofit-kokoelma
dc.subject laumakäyttäytyminen
dc.title Currency crises in emerging markets : Capital flows and herding behaviour
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-201408071959 BOFIT Discussion Papers
dc.series.year 2001
dc.series.number 10/2001
dc.series.sortingnumber 10 20.4.2001
dc.contributor.orgunit Institute for Economies in Transition (BOFIT)

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