Global Imbalances and us Policy Responses

With signs of normalization seemingly in place in the world economy, a number of problems show the possibility of aggravation in the future. The volume of derivatives in American banks grows significantly, high risk instruments are back in place and their use becomes more active, global imbalances increase. All of the above requires thorough approaches when creating mechanisms which can neutralize external shocks for the Russian economy and make it possible to develop in the new post-crisis environment.

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Overheating in Credit Markets: Origins, Measurement, and Policy Responses

CFA Digest ◽

10.2469/dig.v43.n3.5 ◽

2013 ◽

Vol 43 (3) ◽

Cited By ~ 1

Author(s):

Mathias Moersch

Keyword(s):

Credit Markets ◽

Policy Responses

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Official Financial Flows, Capital Mobility, and Global Imbalances

CFA Digest ◽

10.2469/dig.v45.n9.1 ◽

2015 ◽

Vol 45 (9) ◽

Author(s):

Nicholas Tan

Keyword(s):

Capital Mobility ◽

Global Imbalances ◽

Financial Flows

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Capital Flows to Developing Countries: Blessing or Curse? (Distinguished Lecture)

The Pakistan Development Review ◽

10.30541/v37i4ipp.125-151 ◽

1998 ◽

Vol 37 (4I) ◽

pp. 125-151 ◽

Cited By ~ 1

Author(s):

Mohsin S. Khan

Keyword(s):

Developing Countries ◽

Capital Flows ◽

Financial Integration ◽

Foreign Capital ◽

Foreign Debt ◽

Capital Inflows ◽

Private Capital ◽

Policy Responses ◽

Private Capital Flows ◽

Significant Phenomenon

The surge of private capital flows to developing countries that occurred in the 1990s has been the most significant phenomenon of the decade for these countries. By the middle of the decade many developing countries in Asia and Latin America were awash with private foreign capital. In contrast to earlier periods when the scarcity of foreign capital dominated economic policy-making in these countries, the issue now for governments was how to manage the largescale capital inflows to generate higher rates ofinvestrnent and growth. While a number of developing countries were able to benefit substantially from the private foreign financing that globalisation made available to them, it also became apparent that capital inflows were not a complete blessing and could even turn out to be a curse. Indeed, in some countries capital inflows led to rapid monetary expansion, inflationary pressures, real exchange rate appreciation, fmancial sector difficulties, widening current account deficits, and a rapid build-up of foreign debt. In addition, as the experience of Mexico in 1994 and the Asian crisis of 1997-98 demonstrated, financial integration and globalisation can cut both ways. Private capital flows are volatile and eventually there can be a large reversal of capital because of changes in expected asset returns, investor herding behaviour, and contagion effects. Such reversals can lead to recessions and serious problems for financial systems. This paper examines the characteristics, causes and consequences of capital flows to developing countries in the 1990s. It also highlights the appropriate policy responses for governments facing such inflows, specifically to prevent overheating of the economy, and to limit the vulnerability to reversals of capital flows.

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