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When Do Capital Inflow Surges End in Tears?

Author

Listed:
  • Atish R. Ghosh
  • Jonathan D. Ostry
  • Mahvash S. Qureshi

Abstract

We investigate in a sample of 53 emerging markets over 1980-2014 whether countries with open capital accounts are necessarily at the mercy of global events, or are able to take policy actions when receiving inflows to mitigate the impact of a subsequent reversal. Our analysis suggests that, while changes in global conditions have an important bearing on crisis susceptibility, countries that allow the buildup of macroeconomic and financial vulnerabilities during boom times, and which receive mostly debt flows, are significantly more likely to see capital inflow surge episodes end in a financial crisis.

Suggested Citation

  • Atish R. Ghosh & Jonathan D. Ostry & Mahvash S. Qureshi, 2016. "When Do Capital Inflow Surges End in Tears?," American Economic Review, American Economic Association, vol. 106(5), pages 581-585, May.
    • Handle: RePEc:aea:aecrev:v:106:y:2016:i:5:p:581-85
    Note: DOI: 10.1257/aer.p20161015
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Vincent R. Reinhart, 2009. "Capital Flow Bonanzas: An Encompassing View of the Past and Present," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 5(1), pages 9-62.
    2. Mr. Atish R. Ghosh & Mahvash S Qureshi & Naotaka Sugawara, 2014. "Regulating Capital Flows at Both Ends: Does it Work?," IMF Working Papers 2014/188, International Monetary Fund.
    3. Ostry, Jonathan D. & Ghosh, Atish R. & Chamon, Marcos & Qureshi, Mahvash S., 2012. "Tools for managing financial-stability risks from capital inflows," Journal of International Economics, Elsevier, vol. 88(2), pages 407-421.
    4. Cardarelli, Roberto & Elekdag, Selim & Kose, M. Ayhan, 2010. "Capital inflows: Macroeconomic implications and policy responses," Economic Systems, Elsevier, vol. 34(4), pages 333-356, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G01 - Financial Economics - - General - - - Financial Crises

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