Historical experience shows that in the world of high capital mobility, sudden stops of capital inflows may occur, typically triggering financial crises. The latest financial crisis in the euro zone (EZ) seems to support this point of view. Euro adoption encouraged a capital flow bonanza from...

The liberalization of the capital account of the balance of payments was one of the main reasons of the increasing amount of capital flows that came in into many emerging economies. In the last decades, the restrictions on these capital movements have been eliminated and the world has witnessed...

This paper analyses volatility, persistence, predictability, correlation, comovement (or contagion risk) and sudden stop (reversibility) of capital flows (foreign direct investment (FDI), foreign portfolio equity investment, long-term and short-term debt flows) using time series econometric...

This paper briefly reviews the IMF’s current practices and policy-making in the context of a proposed quadrupling of IMF resources to $1 trillion dollars, and a consequent increase in the Fund’s influence over economic policy-making in developing countries. It finds that the IMF is still...

This chapter investigates the effect of the exchange regime on the likelihood of sudden stops. A panel probit analysis is conducted on the data of 43 developing countries from 1980 to 2010. The test investigates the interaction of surges and the exchange regime and their potential impact of the...

This paper argues that developing countries have limited arsenal at the national level to manage financial instability. The solutions have to be sought mainly at the multilateral level and these include: provision of adequate international liquidity at appropriate terms for current account...

This paper examines the implications of the liberalization of capital outflows in China, India, Brazil, and South Africa (CIBS) for other developing countries. It focuses on their prospects of attracting not only foreign direct investment (FDI), but also portfolio capital flows from CIBS. To...

This paper examines the implications of the liberalization of capital outflows in China, India, Brazil, and South Africa (CIBS) for other developing countries. It focuses on their prospects of attracting not only foreign direct investment (FDI), but also portfolio capital flows from CIBS. To...

The standard deviations of capital flows to emerging countries are 80 percent higher than those to developed countries. First, we show that very little of this difference can be explained by more volatile fundamentals or by higher sensitivity to fundamentals. Second, we show that most of the...

The scarcity of up-to-date data is a meaningful constraint in the analysis of capital flows, especially for Emerging Markets (EMs). Indeed, the most commonly used source of cross-country data on capital flows is the Balance of Payments (BoP) statistics collected by the International Monetary...