Investor Risk Aversion and Financial Fragility in Emerging Economies

Arbeitspapier

Bank intermediated short-term capital inflows play a crucial role in the financial structure of many emerging economies. Yet since these funds are subject to the risk of early withdrawal, an excessive reliance on this financing is often associated with a financial or currency crisis. We model a situation where withdrawals are motivated by a change in either the domestic or foreign fundamentals. We show that, for a given change in fundamentals, a sudden reversal in the capital flows, and hence a financial crisis, is more likely the more risk averse are the foreign investors. We also show that a policy to tax early withdrawals may discourage the inflows more likely to cause fundamental runs, as it prevents the relatively more risk averse investors from investing. However, the policy must be fine-tuned to avoid discouraging all capital inflows.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Quaderni - Working Paper DSE ; No. 380

Klassifikation und Themen

• Klassifikation: Wirtschaft

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Rovelli, Riccardo
• Ereignis: Veröffentlichung
• (wer): Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
• (wo): Bologna
• (wann): 2000

Weitere Informationen

• DOI: doi:10.6092/unibo/amsacta/4929
• Handle: http://hdl.handle.net/10419/159221
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ