How Capital Flows Affect Economy-Wide Vulnerability and Inequality: Flow-of-Funds Analysis of Selected Asian Economies

Delivering sustainable economic growth
Sep 30, 2014 | Asian Development Bank

In contrast to the situation before the 1997–1998 Asian financial crisis, Asia is now a region with excess, especially corporate, savings. Using flow-of-funds data, this study by the Asian Development Bank determines that the surge in liquidity in Asian financial systems has changed the behaviour of agents and institutions. The general trend shows that agent references for investing in financial instruments have increased as financial liberalisation provides more opportunities to do so. The study suggests that this can have economy-wide repercussions, ranging from financial instability to widening income disparity and falling elasticity of employment.

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