Manias, panics and crashes in emerging markets: an empirical investigation of the post-2008 crisis period

Naqvi, Natalya ORCID: 0000-0003-0821-070X (2018) Manias, panics and crashes in emerging markets: an empirical investigation of the post-2008 crisis period. New Political Economy. ISSN 1356-3467

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Abstract

Because of their economic importance, international bond markets are thought to be the likely location for the operation of financial market pressures on emerging market (EM) government policy. An important but unresolved debate that runs through the literature is the relative importance of domestic factors specific to the country receiving the capital flows (pull factors), versus push factors exogenous to the receiving country, in driving portfolio flows to EMs. Through extensive interviews with financial market participants, and analysis of the financial press between January 2008 and 2013, this paper argues that not only were market participants fully aware of the importance of push factors over the cycle, but that their perceptions of the domestic fundamentals themselves were influenced by these push factors. The paper provides evidence on the micro-foundations of investment decision making that make investors susceptible to influence by the push factors, and adds to a growing body of evidence that financial market borrowing costs are even less in the control of emerging market governments than previously assumed, because even when investors pay attention to domestic fundamentals, their assessments can be divorced from reality. This means that government efforts to attract foreign capital through implementing investors' preferred policies may be ultimately futile.

Item Type:	Article
Official URL:	https://www.tandfonline.com/cnpe20
Additional Information:	© 2018 Informa UK Limited, trading as Taylor & Francis Group
Divisions:	International Relations
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
Date Deposited:	05 Oct 2018 14:13
Last Modified:	11 Dec 2024 21:43
Projects:	10214908
Funders:	Cambridge Commonwealth, European and International Trust
URI:	http://eprints.lse.ac.uk/id/eprint/90368

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