The effect of foreign real estate investments on house prices: evidence from emerging economies.

1. INTRODUCTION

Capital flows from abroad (such as foreign direct investment (FDI), portfolio investment, cross-border loans to domestic branches of foreign banks, foreign debt) have been recognized as one the main components of the boom-bust cycle which often resulting in economic crisis in most emerging economies (e.g. South East Asia in the mid 1990s, Mexico in the early 1990s, Argentina in the 1990s). It is argued that "a general boom-bust cycle begins with a boom stage of credit expansion, investment increases, asset prices rise, and increasing capital inflows, and ends up with a bust stage when all those gains reverse" (Kim and Yang, 2011, p.