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Taming the Tide of Capital FlowsA Policy Guide$
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Atish R. Ghosh, Jonathan D. Ostry, and Mahvash S. Qureshi

Print publication date: 2018

Print ISBN-13: 9780262037167

Published to MIT Press Scholarship Online: September 2018

DOI: 10.7551/mitpress/9780262037167.001.0001

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(p.3) 1 Introduction
Taming the Tide of Capital Flows

Atish R. Ghosh

Jonathan D. Ostry

Mahvash S. Qureshi

The MIT Press

This introductory chapter provides an overview of capital flows to emerging markets. In principle, cross-border capital flows to emerging markets have the potential to bring several benefits; in practice, however, such flows are inherently risky—though some forms may be worse than others—potentially widening macroeconomic imbalances and creating balance-sheet vulnerabilities. As such, capital flows require active policy management, which might mean mitigating their undesirable consequences using macroeconomic and macroprudential policies, or controlling their volume and composition directly using capital account restrictions, or both. By the same token, if the inflow phase is successfully managed—through the use of structural measures to steer flows toward less risky types of liabilities, and the use of macroeconomic policies, prudential measures, and capital controls for abating the cyclical component of flows and their consequences—the economy is likely to benefit from foreign capital and to remain resilient when flows recede or reverse.

Keywords:   capital flows, emerging markets, macroeconomic policies, macroprudential policies, inflow phase, structural measures, liabilities, capital controls, foreign capital

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