Capital flows and the balance sheet effect. The direct impact of ultra-easy money policy in advanced economies during the GFC was to spark massive capital inflows to emerging markets (EM) including Indonesia (see Chart 3). On the one hand, this led to an increase of EM liquidity, on the other it posed greater risks to EM financial stability. Chart 3. Gross and Net Capital Flows in Select Emerging Asian Economies 150 pre- AFC AFC post-AFC pre-GFC GFC post-GFC 100 50 -50 -100 -150 Q4 1996 QI 1999 Q22001 Q3 2003 Q42005 QI 2008 Q2 2010 Q1 2013 Gross inflow Gross outflow Net flow Notes: Based on 4-quarter moving sums for Indonesia, the Republic of Korea, the Philippines, and Thailand. Source: Taken from Azis, IJ & D. Yarcia (2015) “How Capital Flows in the Midst of Excess Savings Affect Macrofinancial Vulnerability," Asian Development Review, vol. 32, no. 2, pp. 115-152 Questions: a. Explain why massive capital inflows can be a double-edged sword for emerging markets including Indonesia b. What would be the mechanism of capital outflows affecting the balance sheets of firms that could eventually worsen the macroeconomic conditions S billion

Capital flows and the balance sheet effect. The direct impact of ultra-easy money policy in advanced economies during the GFC was to spark massive capital inflows to emerging markets (EM) including Indonesia (see Chart 3). On the one hand, this led to an increase of EM liquidity, on the other it posed greater risks to EM financial stability. Chart 3. Gross and Net Capital Flows in Select Emerging Asian Economies 150 pre- AFC AFC post-AFC pre-GFC GFC post-GFC 100 50 -50 -100 -150 Q4 1996 QI 1999 Q22001 Q3 2003 Q42005 QI 2008 Q2 2010 Q1 2013 Gross inflow Gross outflow Net flow Notes: Based on 4-quarter moving sums for Indonesia, the Republic of Korea, the Philippines, and Thailand. Source: Taken from Azis, IJ & D. Yarcia (2015) “How Capital Flows in the Midst of Excess Savings Affect Macrofinancial Vulnerability," Asian Development Review, vol. 32, no. 2, pp. 115-152 Questions: a. Explain why massive capital inflows can be a double-edged sword for emerging markets including Indonesia b. What would be the mechanism of capital outflows affecting the balance sheets of firms that could eventually worsen the macroeconomic conditions S billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

(a). Explain the difficulties in regulating international banking. (b). Describe alternative forms of capital inflow to finance external deficits and explain why these methods were used in different times.
Question: Explain the concept of capital flight and its potential consequences for a country's economy and financial stability. A) Capital flight refers to the movement of goods and services across international borders, which has no impact on an economy. B) Capital flight involves the rapid outflow of investment and financial assets from a country, potentially leading to a currency crisis, economic instability, and a weakening of the country's financial system. C) Capital flight is a government policy to attract foreign investments. D) Capital flight has no relevance to a country's economy or financial stability.
11 Use the IS-LM-UIP model for an open economy with flexible exchange rates as a useful tool in discussion of domestic macroeconomic effects of high electricity prices, including petrol and diesel prices, and how this affects the purchasing power and economy of a country when electricity prices are 7-10 times normal
The Balance of Payment (BOP): BOP is a significant indicator of pressure on a country’s foreign exchange rate, and thus of the potential for a firm trading with or investing in that country to experience foreign exchange gains or losses. Based on the scenario, Identify and analyze the main summary statements of the balance of payments accounts and what do they measure? Note: Students are expected to define and explain BOP , and three sections of BOP statements. Each section carries
Asap
Question 10. Applying the Mundell-Fleming model analyse the impact on domestic income, interest rate, CA and KA of the following events: (a) an increase of foreign interest rate; (b) a fall of foreign demand on domestic goods. Provide an analysis for two different countries: country A with fixed exchange rate and perfect capital mobility country B with flexible exchange rate and imperfect capital mobility please do not make a long description but provide graphs and short analysis
The observation that short-term capital has become increasingly mobile internationally probably implies the BP curve has O A. become steeper O B. become flatter C. become unimportant D. become downward sloping
Assume that a nation initially has an output level of 150 units per period and that consumption is also 150 (there is no investment or government spending). Suppose there is a temporary (i.e. one-period) increase in GDP of 16% in period 0. Assume the country has access to global financial markets with an interest rate of 8%. Assume an infinite time horizon for all questions. The United States has experienced large and growing current account deficits for more than 20 years, whereas Japan has experienced large and growing current account surpluses for roughly the same period. The U.S. economy has grown at faster rates than Japan's over the past 10 years. What might explain the difference? Relate your answer to the relationship between the current account, GNDI, and GDP.
9. Consider savings-investment diagrams assuming that there are two countries in the world, A and B. Initially, both countries are identical, i.e., they have the same supply of savings and demand for investment. Therefore, even as open economies, they both have balanced current accounts, i.e., neither has a deficit or surplus. Now assume that in country A, the government increases the budget deficit, shifting the supply of savings to the left. If all other curves (A s investment demand, B s savings supply, B s investment demand) stay the same, what will the effect of the increase in A's budget deficit? a. Country B will have a CA surplus. b. Country A will have a KFA deficit. c. Investment in country B will increase. d. The world real interest rate will fall.
Please answer fast please arjent help please ASAP pls answer
High ,low
With the following excerpts, explain the extent to which the extract supports the view that the BRICS have a similar macroeconomic performance.