[工程科技]AlldollarsrefertoUSCAPITALINFLOWS_BANKINTERMEDIATIONANDLENDINGBOOMSIN.pdfVIP

CAPITAL INFLOWS, BANK INTERMEDIATION AND LENDING BOOMS IN EMERGING ECONOMIES WITH REFERENCE TO EAST ASIA by Ramkishen S. Rajan* December 1999 * School of Economics, University of Adelaide, Australia. E-mail: ramkishen.rajan@adelaide.edu.au. All dollars ($) refer to US$. 1 CAPITAL INFLOWS, BANK INTERMEDIATION AND LENDING BOOMS IN EMERGING ECONOMIES WITH REFERENCE TO EAST ASIA Abstract This paper develops a simple bank-based analytical framework to explain why and how capital inflow surges and lending booms could lead to higher real interest rates in the domestic economy, even after adjusting for country/currency risk premia and exchange rate changes. While this phenomenon of ever-rising capital inflows and sustained - possibly, even widening - interest rate spreads is an important stylized fact in East Asia prior to the 1997-98 crisis, Gourinchas and Valdes (1999) have noted it to be more generally applicable to economies experiencing lending booms. Key words: banks, currency crisis, East Asia, financial liberalization, interest rates JEL Classification: F30, F32, F41 2 1. Introduction The boom and bust episodes that have plagued emerging economies share broadly similar empirical regularities. Domestic and international financial deregulation in the reforming economy leads to an initial surge in capital inflows. Flush with liquidity and given relatively lax pruden