Do Capital Inflows Matter to Asset Prices? The Case of Korea
Kim, Soyoung | September 2009
Abstract
In the present paper, we investigate whether capital flows induce domestic asset price hikes in the case of Korea. This issue is relevant for crisis-hit economies trying to prevent a boom–bust cycle as well as in the formulation of macroeconomic policy objectives in emerging market economies. Korea has recently experienced large capital inflows, in particular a surge in portfolio inflows. Furthermore, asset prices, including stock prices, land prices and nominal and real exchange rates, have also appreciated. The empirical results, obtained using a vector autoregression model, suggest that capital inflow shocks have caused stock prices but not land prices to increase. The effects on the nominal and real exchange rates have been limited, which relates to the accumulation of foreign exchange reserves.
Citation
Kim, Soyoung. 2009. Do Capital Inflows Matter to Asset Prices? The Case of Korea. © Wiley. http://hdl.handle.net/11540/4260.Keywords
Development Economics
Regional Economic Development
Economic Impact
Asian Development Bank
Development
Economies in transition
Economic agreements
Development indicators
ADB
Economic development
Comparative economics
Regional economics
Economic development projects
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