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Capital Flows to Transition Economies; Master or Servant?

Author

Listed:
  • Leslie Lipschitz
  • Alex Mourmouras
  • Timothy D. Lane

Abstract

This paper discusses the forces driving capital flows in the transition countries of Central and Eastern Europe (CEE). It argues that various influences—specifically, the real exchange rate history and trend and the factor intensity of production—can combine to motivate very large capital inflows. These inflows can either undermine attempts at monetary restraint or force excessive appreciations. They can also render the economy highly vulnerable to shifts in market sentiment. The policy implications of the analysis are awkward: exposure to global capital markets sets up difficult dilemmas for policy and leads to vulnerabilities that can be reduced but not eliminated.

Suggested Citation

  • Leslie Lipschitz & Alex Mourmouras & Timothy D. Lane, 2002. "Capital Flows to Transition Economies; Master or Servant?," IMF Working Papers 02/11, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/11
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    References listed on IDEAS

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