Capital flows and capital account management in selected Asian economies

Gross capital in ows and out ows to and from emerging market economies (EMEs) have witnessed a signilcant increase since early 2000s. This rapid increase in the volume of ows accompanied by sharp swings in volatility has ampliled the complexity of macroeconomic management in EMEs. While capital in ows provide additional financing for productive investment and oker avenues for risk diversication, unbridled ows could also exacerbate lnancial instability. In this paper we focus on the evolution of capital ows in a few select emerging Asian economies, and analyze surge and stop episodes a well as changes in the composition of ows across these episodes. We also provide a comprehensive description of the capital account management policies adopted by the host countries and evaluate the efcacy of these measures by analyzing whether they achieved the desired goals.This kind of an analysis is highly relevant especially a time when EMEs around the world are about to face the repercussions of a potential Quantitative Easing (QE) tapering by the US or launch of fresh QE measures by the Euro-zone, either of which could once again heighten the volatility of cross-border capital ows thereby posing renewed macroeconomic challenges for major EMEs.