Aoki, Kosuke, Benigno, Gianluca and Kiyotaki, Nobuhiro (2009) Capital flows and asset prices. CEP Discussion Papers, 921. Centre for Economic Performance, London School of Economics and Political Science, London, UK.
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After liberalizing international transactions of financial assets, many countries experience large swings in asset prices, capital flows, and aggregate production. This paper studies how the adjustment to capital account liberalization depends upon the degree of development of a domestic financial system, and why the economy with an underdeveloped financial system may be vulnerable to shocks to the domestic and foreign finance. We construct a model of a small open economy in which it is difficult to enforce debtors to repay their debts unless the debts are secured by collateral, and assets usable as collateral for international borrowing are more restricted than domestic borrowing.
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||© 2009 the authors|
|Library of Congress subject classification:||H Social Sciences > HG Finance|
|Journal of Economic Literature Classification System:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
F - International Economics > F3 - International Finance > F32 - Current Account Adjustment; Short-Term Capital Movements
F - International Economics > F3 - International Finance > F37 - International Finance Forecasting and Simulation
|Sets:||Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
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