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Cross-Border Investment and the Global Financial Crisis in the Asia-Pacific Region
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| Author(s):
Sayuri Shirai
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| Economic Sector(s):
(1) Global, regional and multisectoral economic and social development strategies and policies |
| ESCAP Reference
No.: WP/09/04 |
| Division/Office:
Macroeconomic Policy and Development |
| Published Date:
December 2009 |
| Country:
{Non-country Specific Publication} |
| Hard Copy Price:
Online Copy Only
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| The subprime mortgage crisis erupted in the United States in mid-2007 and was then transformed into the global financial crisis after the failure of Lehman Brothers in September 2008. The total amount of write-downs of loans and securities by financial institutions for 2007-2010 is estimated to reach $1 trillion in the United States, $604 billion in the United Kingdom, and $814 billion in the Euro Area. By contrast, the Asia-Pacific region is expected to have write-downs of only $210 billion, suggesting the limited damages incurred on the
banking sector. Nonetheless, the Asia-Pacific region suffered from the global financial crisis through two channels. One channel was mainly through capital withdrawals from equity markets by foreign investors, causing a sharp drop in stock prices. The other channel was
through trade linkages with advanced nations. Nearly all countries faced a contraction in exports and production owing to an abrupt decline in import demand in the United States and Europe. This paper analyses how the Asia-Pacific region was affected by the global financial crisis. To do so, the paper focuses on cross-border capital flows and investment patterns by looking at the pre-crisis features of the United States in relation to the world, as well as the Asia-Pacific region. It also focuses on net international investment positions of the Asia-Pacific region in the pre-crisis period. The paper then sheds light on the impact of the global financial crisis on the cross-border capital flows and the balance of payments in the region. |
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1. INTRODUCTION
2. CROSS-BORDER CAPITAL MOVEMENTS BEFORE THE GLOBAL FINANCIAL CRISIS
2.1 The size of the United States capital markets
2.2 Features of cross-border stock investment flows
2.3 Features of cross-border debt securities investment flows
2.4 Features of cross-border banking activities
2.5 Summary of Section 2
3. CHANGES IN NET INTERNATIONAL INVESTMENT POSITIONS BEFORE THE GLOBAL FINANCIAL CRISIS
3.1 Cases of advanced countries: Japan and Australia
3.2 Cases of net external creditor countries: China and Singapore
3.3 Cases of net debtor countries (1): Thailand, Indonesia, Philippines, and Malaysia
3.4 Cases of net external debtor countries (2): Republic of Korea
3.5 Cases of India as a country shifting to emerging economy
3.6 Summary of Section 3
4. IMPACT OF THE GLOBAL FINANCIAL CRISIS ON THE ECONOMY IN THE ASIA-PACFIC REGION
4.1 Changes in cross-border capital movements between the United States and the world
4.2 The direct impact of the global financial crisis on the Asia-Pacific region
4.3 The two channels of crisis contagion to the Asia-Pacific region
5. FINAL REMARKS
6. REFERENCES |
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