International Lending and Financial Crises

There has been remarkable growth in the gross and net external positions and international capital flows in the last two decades. This represents growth of nearly three times among industrialized or developed countries and has led to large effects on the valuation of asset price and exchange rates have also changed considerably with these countries having larger external assets and liabilities. This increase in international capital flows has led to increased interest in understanding the concepts and forces that drive capital flows and their effects on the economy, especially at macro level. Most of what is known about these international capital flows is within risk-free bond trading only. By presenting an analysis of the empirical reasons for the international financial crisis and the role of the International Monetary Fund using what is known about international capital flows, it is possible to understand why these crises...
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