![Page 1: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/1.jpg)
The Impact of Capital Inflows on Asset Prices in Emerging Asian Economies: Is Too Much Money Chasing To Little Good?
Soyoung Kim Doo Yong YangSeoul National University ADB Institute
![Page 2: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/2.jpg)
Motivation Before global financial crisis, there were huge capital
inflows and asset price increases in East Asia. After global financial crisis, capital outflows and asset
price decreases in East Asia. Past studies discussed “boom-bust cycles” that result in
economic crisis of emerging economies: it begins with a boom stage of credit expansion, capital inflows, asset price increases but ends up with a burst stage when all reverse.
This paper examines whether capital inflows increase asset prices (stock price, land price, exchange rates) in East Asia before global financial crisis.
![Page 3: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/3.jpg)
How Capital Inflows Affect Asset Prices? Direct Channel: Capital inflows affects the demand for
assets, and then increases asset prices. In addition, there can be a spill-over effect to other financial markets such as real estate market.
Liquidity Channel: Capital inflows may result in an increase in money supply and liquidity (unless fully sterilized), which in turn can boost the asset prices.
Macro Channel: Capital inflows tend to generate economic booms of the country, and then lead to an increase in asset prices.
![Page 4: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/4.jpg)
Other Reasons for Asset Price Boom However, asset price surge in emerging Asia before global
financial crisis can be due to other factors than capital inflows.
The recovery from the Asian Financial crisis and a better economic perspective of the Asian countries may have led to asset price increases.
Monetary expansion and low interest rates of Asian countries, originating from the recession in the late 1990s and early 2000s, may be another factor explaining the asset price booms.
Exchange rate appreciation against the U.S. dollar may be explained by the massive U.S. national debt.
![Page 5: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/5.jpg)
Recent Studies on the Issue Caballero and Krishnamurthy (2006): in emerging markets
with shortage of stores of value and financial repression, dynamic inefficiency prevails and they are easy to create asset bubbles. They reproduced bubbles dynamics in emerging economies with capital inflows, but there can be asset bubbles, even when foreign investors are not allowed to directly access domestic asset markets.
Ventura (2002): bubbles act as a substitute for international capital flows, improving the international allocation of investment and reducing rate of return differentials across countries. Asset price appreciation can be observed in the economy without any capital inflows.
![Page 6: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/6.jpg)
Objective Do capital inflows contribute to the increase in asset prices
(stock price, land price, exchange rates) in East Asia before global financial crisis?
We are particularly interested in separating the effects of capital inflows shocks from the effects of other factors that may contribute to asset price increase in East Asia.
![Page 7: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/7.jpg)
Past Empirical Studies Montiel (1996), Agenor and Hoffmaister (1998), Corbo
and Hernandez (1994), Jansen (2003), Kim, Kim, and Wang (2004): these studies mostly discuss general macroeconomic effects of capital flows, without focusing on the effects on asset prices.
![Page 8: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/8.jpg)
<Figure 1> Emerging Asian Economies’ Gross Capital Inflows and outflows (in percent of GDP)
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
inflows out flows
Source: International Financial Statistics, IMF
![Page 9: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/9.jpg)
<Figure 3> Patterns of Gross Capital inflows in Emerging Asian Economies
0
20
40
60
80
100
120
140
160
180
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
F D Ibondequity
Source: International Financial Statistics, IMF
![Page 10: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/10.jpg)
<Figure 6> Composite Stock Price Indexes: ASEAN-4, PRC, and Korea1
Source: Bloomberg
![Page 11: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/11.jpg)
<Figure 8> Property Indexes for Selected Asian economies
Source: Bloomberg
![Page 12: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/12.jpg)
<Figure 9> Nominal Effective Exchange Rate1, 2
![Page 13: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/13.jpg)
<Figure 10> Real Effective Exchange Rate1, 2
![Page 14: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/14.jpg)
Empirical Method and Data Panel VAR model
Data-based method Dynamics short sample period
Individual fixed effect Recursive VAR Quarterly Data: 1999:1-2006:1 Five Countries: South Korea, Malaysia, Indonesia, the
Philippines, Thailand
![Page 15: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/15.jpg)
Empirical Model There are three types of factors that affect asset prices
(1) affect asset prices mostly through changes in foreign capital inflows (ex) foreign interest rate shocks
(2) affect asset prices mostly through channels other than foreign capital inflows (ex) P (monetary condition…)
(3) affect domestic asset prices not only through changes in foreign capital flows but also through other channels (ex) changes in domestic economic condition, Y
We would like to control for (2) and (3) to identify capital inflows shocks. Otherwise, identified capital inflows shocks may reflect the effects of other factors than capital inflows.
![Page 16: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/16.jpg)
Empirical Model Basic Model: {Y, P, CAP, SP, LP} Y (real GDP) P (GDP deflator): to control for factors
affecting asset prices, shows aggregate activities CAP (capital inflows or portfolio inflows), SP (stock
price), LP (land price): variables of our interests To identify CAP shocks
Y and P are assumed to be contemporaneously exogenous to CAP CAP is assumed to be contemporaneously exogenous to SP and
LP aggregate activities tend to be sluggish but financial variables
reflect all information immediately (Sims and Zha, 2005) CAP might respond to SP contemporaneously so use end-of-
period data for SP. For LP, direct capital inflows into the real estate market is rare.
![Page 17: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/17.jpg)
<Figure 11> Impulse Responses: Basic Model with Capital Inflows
Y
P
C A P
S P
L P
Y P C A P S P L P
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 3
0
3
6
9
1 2
5 1 0- 3
0
3
6
9
1 2
5 1 0- 3
0
3
6
9
1 2
5 1 0- 3
0
3
6
9
1 2
5 1 0- 3
0
3
6
9
1 2
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
![Page 18: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/18.jpg)
<Figure 12> Impulse Responses: Basic Model with Portfolio Inflows
Y
P
C A P
S P
L P
Y P C A P S P L P
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 0 . 9
0 . 0
0 . 9
1 . 8
2 . 7
5 1 0- 3
0
3
6
9
1 2
5 1 0- 3
0
3
6
9
1 2
5 1 0- 3
0
3
6
9
1 2
5 1 0- 3
0
3
6
9
1 2
5 1 0- 3
0
3
6
9
1 2
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
5 1 0- 1 . 2
0 . 0
1 . 2
2 . 4
3 . 6
4 . 8
![Page 19: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/19.jpg)
Extended Experiments 1 Control for other factors such as capital outflows (portfolio
outflows), interest rate {Y, P, X, CAP, SP, LP} X: capital outflows (OUT), interest rate (R)
Examine the effects on nominal and real effective exchange rates Model 1: {Y, P, X, CAP, SP, LP} (exog) Model 2: {Y, P, CAP, X, SP, LP} X: nominal effective exchange rate (NEER), real
effective exchange rates (REER)
![Page 20: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/20.jpg)
<Figure 13> Impulse Responses to Capital Inflows Shocks and Portfolio Inflows Shocks: Models with Short-Term Interest Rates or Outflows
C A P
S P
L P
C A P - R C A P - O U T P O R T - R P O R T - O U T
1 2 3 4 5 6 7 8 9 1 0- 0 . 8
0 . 0
0 . 8
1 . 6
2 . 4
3 . 2
4 . 0
4 . 8
1 2 3 4 5 6 7 8 9 1 0- 2 . 5
0 . 0
2 . 5
5 . 0
1 2 3 4 5 6 7 8 9 1 0- 0 . 4
0 . 0
0 . 4
0 . 8
1 . 2
1 . 6
2 . 0
2 . 4
2 . 8
1 2 3 4 5 6 7 8 9 1 0- 0 . 6
0 . 0
0 . 6
1 . 2
1 . 8
2 . 4
3 . 0
3 . 6
4 . 2
1 2 3 4 5 6 7 8 9 1 0- 2 . 7
- 1 . 8
- 0 . 9
- 0 . 0
0 . 9
1 . 8
2 . 7
3 . 6
4 . 5
5 . 4
1 2 3 4 5 6 7 8 9 1 00 . 0
0 . 5
1 . 0
1 . 5
2 . 0
2 . 5
3 . 0
3 . 5
1 2 3 4 5 6 7 8 9 1 0- 0 . 8
- 0 . 4
0 . 0
0 . 4
0 . 8
1 . 2
1 . 6
2 . 0
2 . 4
2 . 8
1 2 3 4 5 6 7 8 9 1 0- 3
- 2
- 1
0
1
2
3
1 2 3 4 5 6 7 8 9 1 0- 0 . 5
0 . 0
0 . 5
1 . 0
1 . 5
2 . 0
1 2 3 4 5 6 7 8 9 1 0- 0 . 8
- 0 . 4
0 . 0
0 . 4
0 . 8
1 . 2
1 . 6
2 . 0
2 . 4
2 . 8
1 2 3 4 5 6 7 8 9 1 0- 4
- 3
- 2
- 1
0
1
2
3
1 2 3 4 5 6 7 8 9 1 0- 0 . 5 0
- 0 . 2 5
0 . 0 0
0 . 2 5
0 . 5 0
0 . 7 5
1 . 0 0
1 . 2 5
1 . 5 0
1 . 7 5
![Page 21: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/21.jpg)
C a p i t a l I n f l o w s S h o c k s , N E E R
1 2 3 4 5 6 7 8 9 1 0- 0 . 7 5
- 0 . 5 0
- 0 . 2 5
0 . 0 0
0 . 2 5
0 . 5 0
0 . 7 5
1 . 0 0
1 . 2 5
1 . 5 0
C a p i t a l I n f l o w s S h o c k s , R E E R
1 2 3 4 5 6 7 8 9 1 0- 0 . 7 5
- 0 . 5 0
- 0 . 2 5
0 . 0 0
0 . 2 5
0 . 5 0
0 . 7 5
1 . 0 0
1 . 2 5
1 . 5 0
P o r t f o l i o I n f l o w s S h o c k s , N E E R
1 2 3 4 5 6 7 8 9 1 0- 0 . 4
- 0 . 2
0 . 0
0 . 2
0 . 4
0 . 6
0 . 8
1 . 0
1 . 2
P o r t f o l i o I n f l o w s S h o c k s , R E E R
1 2 3 4 5 6 7 8 9 1 0- 0 . 4
- 0 . 2
0 . 0
0 . 2
0 . 4
0 . 6
0 . 8
1 . 0
1 . 2
C a p i t a l I n f l o w s S h o c k s , N E E R e x o g
1 2 3 4 5 6 7 8 9 1 0- 0 . 7 5
- 0 . 5 0
- 0 . 2 5
0 . 0 0
0 . 2 5
0 . 5 0
0 . 7 5
1 . 0 0
1 . 2 5
C a p i t a l I n f l o w s S h o c k s , R E E R e x o g
1 2 3 4 5 6 7 8 9 1 0- 0 . 7 5
- 0 . 5 0
- 0 . 2 5
0 . 0 0
0 . 2 5
0 . 5 0
0 . 7 5
1 . 0 0
1 . 2 5
P o r t f o l i o I n f l o w s S h o c k s , N E E R e x o g
1 2 3 4 5 6 7 8 9 1 0- 0 . 5 0
- 0 . 2 5
0 . 0 0
0 . 2 5
0 . 5 0
0 . 7 5
1 . 0 0
P o r t f o l i o I n f l o w s S h o c k s , R E E R e x o g
1 2 3 4 5 6 7 8 9 1 0- 0 . 5 0
- 0 . 2 5
0 . 0 0
0 . 2 5
0 . 5 0
0 . 7 5
1 . 0 0
1 . 2 5
<Figure 14> Impulse Responses of Nominal and Real Effective Exchange Rates to Capital Inflows Shocks and Portfolio Inflows Shocks
![Page 22: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/22.jpg)
Extended Experiments 2 Alternative Identifying Assumptions
{CAP, Y, P, SP, LP} (exog) {Y, P, LP, CAP, SP} (endo)
Forecast Error Variance Decomposition
![Page 23: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/23.jpg)
<Figure 14> Impulse Responses of Stock Price and Land Price to Capital Inflows Shocks and Portfolio Inflows Shocks: Alternative Identifying Assumptions
![Page 24: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/24.jpg)
Contribution of Capital Inflows Shocks
Contribution of Portfolio Inflows Shocks
Stock Price Land Price Stock Price Land Price1 quarter 5.5 (3.8) 3.5 (2.9) 1.8 (2.0) 0.9 (1.1)2 quarter 4.5 (3.5) 4.1 (3.7) 1.9 (2.0) 1.5 (1.8)4 quarter 6.5 (4.8) 8.8 (7.0) 3.0 (2.9) 2.7 (3.0)8 quarter 7.8 (6.0) 19.8 (12.5) 4.1 (3.9) 5.5 (5.3)
The role of capital inflows shocks may be underestimated in our model because we control for the second types of factors (that affects asset price directly and also affects asset prices through changes in capital inflows).
Table 3: Forecast Error Variance Decomposition of Asset Prices
![Page 25: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/25.jpg)
Conclusion In recent years, emerging Asian economies experienced
positive comovements of capital inflows and asset prices. We empirically investigated the effects of capital inflows
on asset prices by using a panel VAR model. The empirical results suggest that capital inflows indeed
contributed to the asset price appreciation in emerging Asian economies before global financial crisis.
Positive capital inflows shocks increase stock prices immediately and land price with some delays. They also appreciate the nominal and real exchange rates.
![Page 26: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/26.jpg)
The Case of Korea Do Capital Inflows Matter to Asset Prices? The Case of
Korea (co-authored with Doo Yong Yang), forthcoming, Asian Economic Journal.
Some graphs are taken from “ 자본 시장의 글로벌화와 ” 한국 통화 정책의 독립성 ( 신관호 공저 ), 한국 금융 연구 센터 창립 심표지엄 발표
![Page 27: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/27.jpg)
해외자본의 유입과 유출
![Page 28: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/28.jpg)
< 그림 7> 주가지수 , 부동산 가격지수
![Page 29: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/29.jpg)
Empirical Model VAR [Y, P, R, CAP_OUT, CAP_IN, X] X: KOSPI, KOSDAQ, ERUS, NEER, REER, APT,
HOUSE, FRES, MB, M1, M2 end of period data except for NEER, REER, APT, HOUSE Monthly Data Estimation Period: 1999:1 – 2007:9 Constant, 3 lags
![Page 30: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/30.jpg)
Impulse Responses to Capital Inflows
![Page 31: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/31.jpg)
Impulse Responses to Portfolio Inflows
![Page 32: The Impact of Capital Inflows on Asset Prices in Emerging Asian ...€¦ · Monetary expansion and low interest rates of Asian countries, originating from the recession in the late](https://reader033.vdocuments.us/reader033/viewer/2022042921/5f68f5e65308374dc571e3ee/html5/thumbnails/32.jpg)
6 months 12 months 24 months 48 monthss
Y* 5.0 (3.3) 5.5 (3.4) 6.0 (3.7) 6.8 (4.4)
P* 4.0 (2.6) 4.5 (2.8) 4.6 (2.9) 4.9 (3.1)
Y 9.6 (4.9) 10.2 (4.9) 10.8 (5.1) 11.2 (5.5)
P 6.7 (3.9) 7.0 (3.8) 7.2 (3.9) 7.6 (4.1)
R 5.7 (3.1) 6.4 (3.2) 6.9 (3.5) 7.2 (3.8)
CAP_IN 65.9 (7.2) 62.6 (7.7) 59.4 (8.9) 56.0 (11.2)
SP 3.1 (2.3) 3.9 (2.6) 5.1 (3.6) 6.5 (5.3)
Table 1: Forecast Error Variance Decomposition of Capital Inflows