Capital Flows or Capital Flaws?

Guillermo A. Calvo

in International Financial Markets

Published by University of Chicago Press

Published in print April 2003 | ISBN: 9780226032146
Published online February 2013 | e-ISBN: 9780226032153 | DOI:
Capital Flows or Capital Flaws?

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This chapter presents an overview of recent financial crises in emerging market economies (EMs) with the goal of understanding their nature, find effective solution and prevent their future occurrence. It proposes the hypothesis that EMs suffer from serious credibility problems and highly incomplete financial structures. This chapter provides examples of how capital flows could lead to socially costly crises and explains that some its flaws stem from imperfect information and incomplete markets. It also examines the role of the banking system, maturity of public-sector debt, exchange rates and controls on capital mobility.

Keywords: financial crises; emerging market economies; incomplete financial structures; capital flows; banking system; public-sector debt; exchange rate

Chapter.  10430 words.  Illustrated.

Subjects: International Economics

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