Managing Capital Inflows: What Tools to Use?

Ostry, Jonathan D.; Ghosh, Atish R.; Habermeier, Karl; Laeven, Luc; Chamon, Marcos; Qureshi, Mahvash S.; Kokenyne, Annamaria

doi:10.5089/9781463926540.006

Cited by 251 publications

(226 citation statements)

References 17 publications

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“…Inflows unrelated to country-specific economic fundamentals but instead driven by global driving forces, the argument goes, pose a threat to domestic financial stability. Curbing capital inflows by means of outright capital controls or other measures is often seen as the ultima ratio in a situation in which a country receives massive capital inflows driven by global determinants over which domestic policy has no control (see Ostry et al (2011) Pesaran CD-statistics are shown in parenthesis. * * * , * * , and * denote significance levels of 1%, 5% , and 10%.…”

Section: Discussionmentioning

confidence: 99%

The dynamics of international capital flows: Results from a dynamic hierarchical factor model

Förster

Jorra

Tillmann

2014

Journal of International Money and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The present paper examines the degree of comovement of gross capital inflows, which is a highly sensitive issue for policy makers. We estimate a dynamic hierarchical factor model that is able to decompose inflows in a sample of 47 economies into (i) a global factor common to all types of flows and all recipient countries, (ii) a factor specific to a given type of capital inflows, (iii) a regional factor and (iv) a country-specific component. We find that the latter explains by far the largest fraction of fluctuations in capital inflows followed by regional factors, which are particularly important for emerging markets' FDI and portfolio inflows as well as bank lending to emerging Europe. The global factor, however, explains only a small share of overall variation. The exposure to global drivers of capital flows, i.e. the global factor and the factor specific to each type of capital inflows, is particularly pronounced for countries with a more developed financial system. A fixed exchange rate regime does not shield countries from the ebb and flow of global capital flow cycles. Terms of use: Documents in

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Section: Discussionmentioning

confidence: 99%

The dynamics of international capital flows: Results from a dynamic hierarchical factor model

Förster

Jorra

Tillmann

2014

Journal of International Money and Finance

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“…Even more important, national governments have to be willing to actively implement a rigorous macro-prudential framework, even at the risk of committing Type II errors that forestall sustainable expansions in credit growth. As emphasised by Ostry et al (2011) and Jeanne et al (2012), a broad macro-prudential framework can include a role for capital controls. Finally, excessive leverage in the non-financial sector (corporates and households) can be further deterred through tax and regulatory policies that do not favour debt financing over equity financing (see also Rogoff 1999).…”

Section: Financial Globalisation After the Crisis: Policy Reformsmentioning

confidence: 99%

Financial Globalisation and the Crisis

Lane

2012

Open Econ Rev

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The global financial crisis provides an important testing ground for the financial globalisation model. We ask three questions. First, did financial globalisation materially contribute to the origination of the global financial crisis? Second, once the crisis occurred, how did financial globalisation affect the incidence and propagation of the crisis across different countries? Third, how has financial globalisation affected the management of the crisis at national and international levels?

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“…He finds that foreign exchange policy objectives and overheating concerns have been the two main motives for capital controls, particularly since 2000. 3 See, for example, Ostry et al (2011), Klein (2012), Hutchison et al (2012), Patnaik and Shah (2012) and Warnock (2011). 4 NKI are measured as the difference between inflows by non-residents and net outflows by residents.…”

Section: Introductionmentioning

confidence: 99%