Chang - Capital flows, financial markets and banking crises

The increasing capital flows in the emerging markets and developed countries have raised various concerns worldwide. One main concern is the impact of the sharp decline of capital flows so-called sudden stops on financial markets and the stability of banking systems and the economy. The sudden stops and banking crises have been identified as the two main features of most financial crises, including the recent Asian Financial Crisis and Global Financial Crisis. However, how capital flows and banking crises are connected still remains unanswered.

Most current studies on capital flows are empirical work, which faces various challenges. The challenges include how data has been collected and measured in each country and how sensitive the results are to the data and the adopted methodologies. Moreover, the links between capital flows and banking systems have been neglected. This book helps provide some insight into the challenges faced by empirical studies and the lessons of the recent crises. The book develops theoretical analysis to deepen our understanding on how capital flows, banking systems and financial markets are linked with each other and provides constructive policy implications by overcoming the empirical challenges.

Chia-Ying Chang is a research scholar in the Faculty of Economics at Nagoya City University and an associated member of Macroeconomics Research Unit at the University of Melbourne. She received her PhD in economics from Vanderbilt University, USA. Her research interests include money and banking theory, macroeconomic theory, economic growth and development, industrial organisation and labour economic theory in macroeconomic perspective.

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89Capital Flows, Financial Markets and Banking Crises

Chia-Ying Chang

First published 2017

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2017 Chia-Ying Chang

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British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data

Names: Chang, Chia-Ying, 1972 author.
Title: Capital flows, financial markets and banking crises / by
Chia-Ying Chang.
Description: First Edition. | New York, NY : Routledge, 2017. |
Series: Routledge international studies in money and banking ;
89 | Includes bibliographical references and index.
Identifiers: LCCN 2016055249 | ISBN 9780415749558 (hardback) |
ISBN 9781315469416 (ebook)
Subjects: LCSH: Capital movements. | Banks and banking. | Financial
crises. | International finance.
Classification: LCC HG3891 .C496 2017 | DDC 332/.0424dc23
LC record available at https://lccn.loc.gov/2016055249

ISBN: 978-0-415-74955-8 (hbk)

ISBN: 978-1-315-46941-6 (ebk)

Typeset in Galliard

by Apex CoVantage, LLC

To my parents, my family, and my best friends

There have been many challenges during the period of time during which I worked on this research monograph. There are many people to whom I owe my deepest gratitude. Without their support and encouragement, the production of this book would have been impossible. They are my parents, my family and my best friends. I especially owe my big thanks to Louise Altman, who believes in me and has been with me throughout my most difficult time; to John Singleton, who has been very generous with his time in providing me his comments and support; and to Morris Altman, who has supported me since the early stage of the book. Their hard work and passion in economic research and teaching have inspired me enormously. I am very grateful to have them all in my life.

The majority of the book was started and has been completed during my stay at Nagoya City University. The generosity of Taro Akiyama and Kazuyuki Inagaki and the hospitality of Nagoya City University are especially appreciated. Their kindness and friendship have made this book possible. I also want to thank Yong Ling Lam and Samantha Phua for their patience, and the editors and the project manager and her team for their great work throughout the process. The work of Thakishila Gunaratna as a research assistant and the editing of Pam Englert at the early stage of the book are greatly appreciated. The minimal USD$600 approx. (including tax) in 2014 from Victoria University is also acknowledged here. All errors are my own.

Every cloud has a silver lining. The past few years have been very difficult. However, I have been very fortunate to have my family and friends, who have stood by me and supported me through the difficult time. Because of their love and support, I survived that difficult period, and when the working conditions of the place to which I have devoted more than a decade seriously threatened my health and safety, I have had the courage to leave the place so that I could keep and continue to work for my passion in economics. My family and friends and all the people who have inspired and helped me in various ways are my brightest stars in the darkest sky. Because of these great and wonderful people, I gain strength and I see hope. No word can express my deepest gratitude to them.

At the end, I want to dedicate a quote to people who are reading this book.

It is often in the darkest skies that we see the brightest stars