Do capital inflows matter to asset prices? The case of Korea

Do capital inflows influence domestic asset prices? This question is relevant in emerging market economies, which tend to experience a series of boom-bust cycles related to capital flows. The boom-bust cycle begins with a boom stage of credit expansion, investment increases, asset prices rises, and capital inflow surges, and ends up with a bust stage when all of those reverse. As a result, simultaneous occurrences of huge capital inflows and asset price appreciation in emerging countries have often raised concerns about the possibility of another regional economic crisis.