cuts and appreciation expectation shocks. For both China and Japan - at different points of time - self-fulfilling runs … into yuan and yen have triggered monetary policy expansions, which are identified as the breeding ground for overinvestment … monetary policy and a fixed exchange rate regime are recommended. …

Capital inflows have an enormous importance in the financing of investment in emerging and transition economies …. However short-term inflows, intermediated by the banking sector of the emerging economy, may be subject to early withdrawals … withdrawals may discourage capital inflows which are more likely to give rise to fundamental runs, by helping to select relatively …