--- Recent trends in capital inflows ---
To understand whether US expansionary monetary policy has increased capital flows into Asia or changed their composition, the first step is to compare trends before and after the global financial crisis. Extraordinary movements in capital flows, if any are found, ca...
nnot be attributed solely to QE, as they can be driven by a multitude of other factors. The trend
analysis simply identifies noticeable changes after QE that policy makers
may need to be concerned about, though they may not have clearly identified causes.
Figure 1.3.1 shows aggregate private capital inflows since 2005 into 10 Asian economies: the PRC; Hong Kong,
China; India; Indonesia; Japan; the Republic of Korea; the Philippines; Singapore; Taipei,China; and Thailand. Capital inflows shown as aggregate amounts in Figure 1.3.1a are notable for their volatility. Inflows rapidly increased to over $1.4 trillion in 2007, collapsed with the crisis in 2008 and 2009, sharply rebounded to the pre-crisis level in 2010 and 2011 as the global economy recovered along with QE, and then slowed after the second half of 2011, when the European crisis escalated. While Figure 1.3.1a shows that approximately half of the aggregate capital inflows were accounted for by the PRC and Japan, Figure 1.3.1b proves that the volatility of capital inflows was perceptible in most Asian countries.
By presenting average ratios of capital inflow to GDP, Figure 1.3.1b suppresses the dominating effects of the PRC and Japan, exaggerating instead the influence of the regional financial hubs—Singapore and Hong Kong, China—as their capital
inflows are extremely large relative to their GDP. In the depth of global financial turmoil, the capital inflows to these 10
countries plummeted to 1.7% of GDP in 2008–2009 from an average of 8.4% in the previous 3 years. But inflows rebounded
nearly as sharply, returning to an average of 7.4% of GDP in 2010–2012. The same pattern is observed even excluding Singapore and Hong Kong, China. Capital inflows collapsed from 9.3% of GDP on average in 2007 to 1.6% in 2008, and then
recovered to about 8% in 2010, close to the pre-crisis level.
--- JPN = Japan; PRC = People’s Republic of China; HKG = Hong Kong, China; SIN =
--- Notes: As data for 2012 are available only to the third quarter for Hong Kong,
China; India; and the Philippines, and to the first half for the PRC, they are annualized by multiplication. Ratios are simple averages of the GDP ratios for
--- Source: ADB estimates from CEIC Data Company (accessed 15 March 2013).
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