Capital Inflows, Credit Growth, and Financial Systems

2015 ◽  
Author(s):  
Deniz Igan ◽  
Tan Zhibo
Keyword(s):  
Capital Inflows ◽  
Financial Systems ◽  
Credit Growth

scholarly journals Capital Inflows, Credit Growth, and Financial Systems

2015 ◽  
Vol 15 (193) ◽  
pp. 1 ◽  
Author(s):  
Deniz Igan ◽  
Zhibo Tan ◽  
◽  
Keyword(s):  
Capital Inflows ◽  
Financial Systems ◽  
Credit Growth

Toward the Policy Maker’s Vade Mecum

2018 ◽  
Author(s):  
Atish R. Ghosh ◽  
Jonathan D. Ostry ◽  
Mahvash S. Qureshi
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Balance Sheet ◽  
Capital Controls ◽  
Policy Advice ◽  
Capital Inflows ◽  
Medium Term ◽  
Credit Growth ◽  
Monetary Authorities ◽  
Fx Market

This chapter provides concrete policy advice for dealing with capital inflows. In sum, once the monetary authorities have allowed the exchange rate to appreciate to a level that is not undervalued from a multilaterally consistent medium-term perspective, they may want to start intervening in the foreign exchange (FX) market to prevent further appreciation, sterilizing the intervention if there are inflationary pressures. If the economy shows signs of overheating, monetary and fiscal tightening might be necessary, together with macroprudential measures to contain excessive credit growth. To the extent these policies prove insufficient, the authorities need to consider bolstering them by imposing or tightening capital controls. At the same time, national authorities must be mindful of growing balance-sheet mismatches in the economy and should avail themselves of both prudential measures and capital controls to shift the composition of inflows toward less risky forms of liabilities.

scholarly journals IMPLICATIONS OF CAPITAL FLOWS FOR DOMESTIC CREDIT GROWTH: EVIDENCE FROM PANEL DATA ANALYSIS

2020 ◽  
Vol 8 (4) ◽  
pp. 231-245
Author(s):  
Aylin Soydan ◽  
◽  
Serap Bedir Kara ◽  
Keyword(s):  
Developing Countries ◽  
Data Analysis ◽  
Panel Data ◽  
Capital Flows ◽  
Panel Data Analysis ◽  
Capital Inflows ◽  
Policy Implications ◽  
Credit Growth ◽  
Credit Creation ◽  
The Impact

Following the 2007-2009 global crisis, high credit growth became an issue of concern with an emphasis on its relationship with capital flows. It is argued that large and volatile international capital flows lead to credit expansion, which in turn, may cause economic and financial instabilities when it reaches excessive levels, particularly in developing countries. This paper aims to investigate the association between credit growth and capital inflows in the context of developing countries by using panel data analysis. The methodology employed in the study offers a number advantages by allowing for heterogeneity and cross-sectional dependence in the panel, while also considering the endogeneity issue. The overall results of the study provides evidence for the impact of capital inflows, more particularly other capital inflows, on credit growth in the sample. This finding suggests a more direct relationship between capital inflows and credit creation as other inflows mostly comprise international banking and trade credits. It is not surprising given the fact that banking sector has a critical role in the financial systems of developing countries. The significance of international dimension for credit creation through other capital inflows and the intermediary role of the banking system should have monetary policy implications, in the macroprudential or more conventional fashion.

scholarly journals From Territorial to Monetary Sovereignty

2017 ◽  
Vol 18 (2) ◽  
Author(s):  
Katharina Pistor
Keyword(s):  
Money Supply ◽  
Sovereign Debt ◽  
Foreign Currency ◽  
Debt Crisis ◽  
Capital Inflows ◽  
State Sovereignty ◽  
Sovereign Debt Crisis ◽  
Financial Systems ◽  
Critical Part ◽  
Foreign Law

AbstractState sovereignty is closely intertwined with, but not limited to, control over territory and people. It has long been recognized that control over monetary affairs is a critical part of genuine sovereignty. In this Article, I go a step further and argue that the relevance and importance of territorial versus monetary sovereignty has shifted in favor of the latter. This shift goes hand in hand with the rise of credit-based financial systems. Such systems depend, in the last instance, on backstopping by an entity with control over its own money supply and no binding survival constraints. Only states with monetary sovereignty fit this pattern. All others are de facto more like private entities, which by definition cannot manipulate their own survival constraint. States can surrender their monetary sovereignty directly by adopting another currency or by issuing their own debt in foreign currency and under foreign law. They also compromise their sovereignty by permitting unlimited capital inflows denominated in currencies other than their own. This is because in times of crisis they will not be able to rescue the domestic financial system from its tendency to self-destruct without subjecting itself to a sovereign debt crisis and the implied need to rely on a lifeline from other states or supranational entities.

scholarly journals An Islamic Perspective on Capital Markets and "Islamic" Securities in Malaysia

1995 ◽  
Vol 34 (4II) ◽  
pp. 865-878 ◽  
Author(s):  
Mohammad Anwar
Keyword(s):  
Developing Countries ◽  
Financial Markets ◽  
Production Efficiency ◽  
Capital Inflows ◽  
Capital Flight ◽  
Economic Welfare ◽  
Financial Contracts ◽  
Financial Systems ◽  
Productive Activities ◽  
Investment Opportunities

Financial systems channel funds in an economy from the surplus economic units lacking appropriate investment opportunities to the deficit economic units with such opportunities. The surplus units seeking returns by employing their funds in productive activities and the deficit units interested in exploiting their investment opportunities contact one another through a network of financial markets a~d institutions in the economy. The participants make financial contracts in ways which satisfy their requirements regarding liquidity, denomination, maturities, and risk diversification [Anwar (1987), pp. 296-297]. In this way, the financial markets contribute to a higher production, efficiency, and economic welfare of everyone in the society [Mishkin (1989), p. 45]. In recent years, the appetite for investment in the markets of developing countries has increased manyfold [Hussain (1994), p. 2]. A good many of such developing markets are in Islamic countries such as Egypt, Turkey, Bangladesh, Pakistan, and Malaysia. Well-developed Islamic financial markets would contribute towards economic development by attracting capital inflows and checking capital flight from the Islamic nations.

Liberalizing Capital Flows and Managing Outflows - Background Paper

Policy Papers ◽  
2012 ◽  
Vol 2012 (14) ◽  
Author(s):  
Keyword(s):  
Resource Allocation ◽  
Empirical Evidence ◽  
Financial Development ◽  
Capital Flows ◽  
Financial Crises ◽  
Cost Of Capital ◽  
Capital Inflows ◽  
Financial Systems ◽  
Financing Costs ◽  
Weak Growth

Liberalization of capital flows can benefit both source and recipient countries by improving resource allocation, reducing financing costs, increasing competition and accelerating the development of domestic financial systems. The empirical evidence, however, is mixed on the benefits, and it suggests that countries benefit most when they meet certain thresholds related to institutional and financial development. The principal cost of capital flow liberalization stems from the economic instability brought on by volatile capital flows. In extreme cases, sudden stops or reversals in capital inflows can trigger financial crises followed by prolonged periods of weak growth.

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