This paper examines the link between the net foreign asset position, the trade balance and the real exchange rate. In particular, it decomposes the impact of a country's net foreign asset position (external wealth) on its long-run real exchange rate into two mechanisms: the relation between...

The paper surveys the research undertaken in the area of banking and currency crises. The causes and implications of the twin crises are discussed, along with the theoretical and empirical framework for investigating them. The overview has highlighted a number of interesting aspects. A...

This paper reviews the experience with capital controls in industrial and developing countries, considers the policy issues raised when the effectiveness of capital controls diminishes, examines the medium-term benefits and costs of an open capital account, and analyzes the policy measures that...

This paper reports research on the impact of controls on capital movements on the private capital accounts of countries` balance of payments using data drawn from 52 countries for the period 1985-92. The results indicate that: (1) capital controls operated by developing countries have not been...

This paper investigates the extent to which financial markets in the Pacific Basin Region have become more integrated, by analyzing the comovements of real interest rates. The paper uses cointegration and error correction models and draws inferences on the degree of capital market integration by...

This study analyzes structural changes in the determinants of private sector capital flows that resulted from the reforms both in the domestic financial market and in the external capital account of Finland during the 1980s and early 1990s. A Kouri-Porter type of model of the capital account is...

This paper provides a consistent theoretical framework to explain the fundamental determinants of the evolution in the medium to longer run of the real effective exchange rate of the United States relative to the currencies of the other G-7 countries. The fundamental determinants are...

This paper examines issues in sequencing and pacing capital account liberalization and draws lessons from experience in four countries (Chile, Indonesia, Korea, and Thailand). The paper focuses on the interrelationship between capital account liberalization, domestic financial sector reforms,...

The relationship between currency exchange rate risk and country risk, country development, and country geographic location are examined. Using a sample of 52 countries over the period from 1991 through 1995, results indicate that those countries with relatively high levels of country risk...

This paper attempts to investigate the impact on factor prices and real exchange rate owing to an inflow of foreign capital only in the exportable sector of the host country. In doing so, we amalgamate Heckscher-Ohlin and Specific Factor models of trade which is popularly known as the H-O...