Financial Liberalization and Volatility in Emerging Market Economies (Published under the wrong title "Capital Markets and the Instability of Open Economies")

Details

Serval ID
serval:BIB_754D2644EBC7
Type
A part of a book
Publication sub-type
Chapter: chapter ou part
Collection
Publications
Institution
Title
Financial Liberalization and Volatility in Emerging Market Economies (Published under the wrong title "Capital Markets and the Instability of Open Economies")
Title of the book
The Asian Financial Crises: Causes, Contagion and Consequences
Author(s)
Aghion P., Bacchetta P., Banerjee A.
Publisher
Cambridge University Press
Address of publication
New York, NY, USA
ISBN
978-0521770804
Publication state
Published
Issued date
1999
Editor
Agénor P.R., Miller M., Vines D., Weber A.
Chapter
5
Pages
167-190
Language
english
Abstract
The recent East Asian crisis has highlighted the relationship between financial development and output volatility. In this essay we develop a simple model of a small open economy producing a tradeable good using a non-tradeable input and where firms access to borrowings and investment depends on current cash flows. We then show, first that macroeconomic volatility only occurs at intermediate levels of financial development; second, that whilst full financial liberalization, including an unrestricted opening to foreign lending, can destabilize an emerging market economy, in contrast output volatility can be avoided if the same economy opens up to foreign direct investment only. We also draw several policy conclusions regarding the adequate responses to financial crises.
Keywords
Emerging markets, Volatility, Financial liberalization
Create date
03/04/2009 14:03
Last modification date
21/08/2019 6:14
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