When Do Capital Inflow Surges End in Tears?

We investigate in a sample of 53 emerging markets over 1980-2014 whether countries with open capital accounts are necessarily at the mercy of global events, or are able to take policy actions when receiving inflows to mitigate the impact of a subsequent reversal. Our analysis suggests that, while ch...

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Bibliographic Details
Published in:The American economic review 2016-05, Vol.106 (5), p.581-585
Main Authors: Ghosh, Atish R., Ostry, Jonathan D., Qureshi, Mahvash S.
Format: Article
Language:English
Subjects:
Analysis
Capital movement
DO CAPITAL FLOWS NEED TO BE TAMED
Economic crisis
Economic theory
Emerging markets
GDP
Gross Domestic Product
Market economies
Sovereign debt
Studies
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Summary:We investigate in a sample of 53 emerging markets over 1980-2014 whether countries with open capital accounts are necessarily at the mercy of global events, or are able to take policy actions when receiving inflows to mitigate the impact of a subsequent reversal. Our analysis suggests that, while changes in global conditions have an important bearing on crisis susceptibility, countries that allow the buildup of macroeconomic and financial vulnerabilities during boom times, and which receive mostly debt flows, are significantly more likely to see capital inflow surge episodes end in a financial crisis.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.p20161015