Capital flow, asset prices and macroeconomic performance in | 17650
International Research Journals

Journal of Research in Economics and International Finance

All submissions of the EM system will be redirected to Online Manuscript Submission System. Authors are requested to submit articles directly to Online Manuscript Submission System of respective journal.

Capital flow, asset prices and macroeconomic performance in an emerging market economy: models and policy perspectives


Rilina Basu Banerjee and Ranjanendra Narayan Nag

The goal of the paper is to understand mechanisms through which an external financial shock produces macroeconomic outcomes in an emerging market economy. We examine the transmission mechanisms from two perspectives. One is the equity-finance and the other one is the bank- loan. The basic mechanism is simple. Stock market and financial intermediaries supply liquid assets to foreigners who are not committed to any long-term investment. If, for exogenous reasons, foreign investors withdraw their funds, there is a run on currency which can reduce effective demand, supply of credit and output.

Share this article