<Li> Emerging market countries began to adopt sound monetary and fiscal policies as well as market - oriented reforms including trade and capital market liberalization . Such policy reforms, among others, have resulted in a credible increase in the rate of return on investments . </Li> <P> As described above, hot money can be in different forms . Hedge funds, other portfolio investment funds and international borrowing of domestic financial institutions are generally considered as the vehicles of hot money . In the 1997 East Asian Financial Crisis and in the 1998 Russian Financial Crises, the "hot money" chiefly came from banks, not portfolio investors . </P> <P> Capital flows can increase welfare by enabling households to smooth out their consumption over time and achieve a higher level of consumption . Capital flows can help developed countries achieve a better international diversification of their portfolios . </P> <P> However, large and sudden inflows of capital with a short term investment horizon have negative macroeconomic effects, including rapid monetary expansion, inflationary pressures, real exchange rate appreciation and widening current account deficits . Especially, when capital flows in volume into small and shallow local financial markets, the exchange rate tends to appreciate, asset prices rally and local commodity prices boom . These favorable asset price movements improve national fiscal indicators and encourage domestic credit expansion . These, in turn, exacerbate structural weakness in the domestic bank sector . When global investors' sentiment on emerging markets shift, the flows reverse and asset prices give back their gains, often forcing a painful adjustment on the economy . </P>

Which of the following is example for hot currency