Jump to ContentJump to Main Navigation
Preventing Currency Crises in Emerging Markets$
Users without a subscription are not able to see the full content.

Sebastian Edwards and Jeffrey A. Frankel

Print publication date: 2002

Print ISBN-13: 9780226184944

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226185057.001.0001

Show Summary Details
Page of

PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use (for details see www.chicago.universitypressscholarship.com/page/privacy-policy).date: 18 November 2018

Negative Alchemy?

Negative Alchemy?

Corruption, Composition of Capital Flows, and Currency Crises

Chapter:
(p.461) 10 Negative Alchemy?
Source:
Preventing Currency Crises in Emerging Markets
Author(s):
Shang-Jin Wei, Yi Wu
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226185057.003.0011

This chapter examines the influences of corruption and lack of transparency on capital flows composition. It focuses on the foreign direct investment (FDI). Corruption may influence the composition of capital inflows in such a way that the country is more likely to experience a currency crisis. A corrupt country seems to have a composition of capital inflows that is relatively light in FDI and relatively heavy in bank loans. Countries that are more corrupt tend to have a capital inflow structure that depends relatively more on bank borrowing than FDI. Furthermore, corruption could lead to a financial crisis by weakening domestic financial supervision and damaging the quality of banks' and firms' balance sheets. Thus, the connection between corruption and financial crises offers a reason to decrease corruption. The key to greater financial stability is not corruption per se but foreign loans and other short-term capital.

Keywords:   corruption, capital flows, foreign direct investment, currency crisis, corrupt country, capital inflows, bank loans, financial crisis, foreign loans

Chicago Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us.