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Capital Flows and Economic Fluctuations :, The Role of Commercial Banks in Transmitting Shocks, Yong Sarah Zhou

This paper uses a general equilibrium model to examine the central role played by commercial banks in intermediating and amplifying the capital flow shocks to the local economy in the 1997 Asia financial crisis. It finds that a sudden stop of capital inflows affects the equilibrium credit supply through two channels: first, the plunge of foreign financing decreases the loanable funds directly; and second the sudden stop drives up the cost of providing banking services, thereby additionally reducing the available bank credit to firms through a "deposit run". Empirical results from a VAR model broadly support the theoretical implications
Table Of Contents
Contents; 1. Introduction; Figures; 1. The Pivotal Role of Commercial Banks in Transmitting Capital Flow Shocks; 2. Related Literature; 3. Empirical Evidence for the Model; 3.1. Boom and Bust in Capital Flows; 2. Capital Flows to Five Asian Crisis Economies; 3.2. Domestic Banking System Intermediated the Capital Flows; 3. Net Private Capital Flows to Five Asian Crisis Countries by Categories; 3.3. Heavy Corporate Dependence on Domestic Bank Financing; Tables; 1. Annual Growth Rate of Bank Lending to Private Sector; 2. Bank Lending to Private Sector as a Share of GDP; 4. The Model
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (32 p.)
Specific Material Designation
Form Of Item

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