Corruption, Composition of Capital Flows, and Currency Crises

Wei, Shang-Jin

World Bank, Washington, DC

关键词: BALANCE SHEETS;    BANK CREDIT;    BANK FOR INTERNATIONAL SETTLEMENTS;    BANK LENDING;    BANK LOANS;   

DOI  :  10.1596/1813-9450-2429
RP-ID  :  WPS2429

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Crony capitalism and internationalcreditors' self-fulfilling expectations are oftensuggested as rival explanations for currency crises. Apossible link between the two has not been explored. Theauthor shows one channel through which crony capitalism canincrease the chance of a currency/financial crisis byaltering the composition of capital inflows. Using data onbilateral foreign direct investment and bilateral bankloans, the author finds clear evidence that in corruptcountries the composition of capital inflows is relativelylight in foreign direct investment. Earlier studiesindicated that a country with a capital inflow structure ismore likely to run into a currency crisis down the road(partly through international creditors'self-fulfilling expectations). Therefore, crony capitalism,through its effect on the composition of a country'scapital inflows, makes the country more vulnerable tocurrency crises brought about by self-fulfillingexpectations. Corruption may also weaken domestic financialsupervision, with a subsequent deterioration in the qualityin banks' and firms' balance sheets.