@article{Frankel:233414,
      recid = {233414},
      author = {Frankel, Jeffrey A. and Okongwu, Chudozie},
      title = {Liberalized Portfolio Capital Inflows in Emerging Markets:  Sterilization, Expectations, and the Incompleteness of  Interest Rate Convergence},
      address = {1995-06},
      number = {1554-2016-132493},
      series = {Working Paper},
      pages = {54},
      year = {1995},
      abstract = {The paper examines interest rates in nine Latin American  and East Asian countries during the period 1987-1994. The  goal is to discover why interest rate's have remained high,  failing to
converge to U.S. levels, despite capital market  liberalization and a resurgence of portfolio
capital  inflows during the second half of this sample period.  Related questions are whether
portfolio capital flows are  strong enough to equalize expected returns between  these
"emerging markets" and the U.S., and whether there is  any scope left for the authorities to
sterilize inflows.  The conclusion of the study is that the\e largest single  component of the
gap in interest rates is expectations of  depreciation of the local currencies against the  dollar.
Key to the analysis is the use of survey data on  exchange rate forecasts by market
participants. Indicative  of integrated financial markets, we also find a big effect  of U.S.
interest rates on local interest rates, and a  highly significant degree of capital flow offset  to
monetary policy.},
      url = {http://ageconsearch.umn.edu/record/233414},
      doi = {https://doi.org/10.22004/ag.econ.233414},
}