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Capital Inflows and Reserve Accumulation: The Recent Evidence

  • Carmen M. Reinhart
  • Vincent R. Reinhart

Over the past decade, policymakers in many emerging market economies have opted to limit fluctuations of the value of their domestic currencies relative to the U.S. dollar. A simple interest-parity relationship is used to identify the potential sources of upward pressure on the value of a foreign exchange rate and to explain the policy options to damp them. The paper then documents the extent to which the accumulation of foreign exchange reserves has been sterilized and provides a comprehensive list of major policy initiatives related to stemming forces that would otherwise appreciate the exchange rate in over one hundred countries. This examination of policy efforts shows that a wide variety of tools are used in the attempt to stem the tide of capital flows.

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File URL: http://www.nber.org/papers/w13842.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13842.

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Date of creation: Mar 2008
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Publication status: published as Reinhart, Carmen M. & Reinhart, Vincent R., 2011. "Entrada de capitales y acumulación de reservas: evidencia reciente," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 20, pages 15-25.
Handle: RePEc:nbr:nberwo:13842
Note: IFM
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Sebastian Edwards, 1999. "How Effective are Capital Controls?," NBER Working Papers 7413, National Bureau of Economic Research, Inc.
  2. Reinhart, Carmen & Reinhart, Vincent, 2001. "What hurts most?: G-3 exchange rate or interest rate volatility," MPRA Paper 14098, University Library of Munich, Germany.
  3. Kaminsky, Graciela L. & Lewis, Karen K., 1996. "Does foreign exchange intervention signal future monetary policy?," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 285-312, April.
  4. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
  5. Kenneth Rogoff & Yu-chin Chen, 2002. "Commodity Currencies and Empirical Exchange Rate Puzzles," IMF Working Papers 02/27, International Monetary Fund.
  6. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-69, December.
  7. Robert Brandon Kahn & Adam Bennett & María Vicenta Carkovic S. & Susan Schadler, 1993. "Recent Experiences with Surges in Capital Inflows," IMF Occasional Papers 108, International Monetary Fund.
  8. Jeffrey A. Frankel and Chudozie Okongwu., 1995. "Liberalized Portfolio Capital Inflows in Emerging Markets: Sterilization, Expectations, and the Incompleteness of Interest Rate Convergence," Center for International and Development Economics Research (CIDER) Working Papers C95-054, University of California at Berkeley.
  9. Reinhart, Carmen & Reinhart, Vincent, 1999. "On the use of reserve requirements in dealing with capital flow problems," MPRA Paper 13703, University Library of Munich, Germany.
  10. Leonardo Bartolini & Allan Drazen, 1996. "Capital account liberalization as a signal," Staff Reports 11, Federal Reserve Bank of New York.
  11. Carmen M. Reinhart & Vincent Raymond Reinhart, 2002. "What Hurts Emerging Markets Most? G3 Exchange Rate or Interest Rate Volatility?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 133-170 National Bureau of Economic Research, Inc.
  12. Reinhart, Carmen & Reinhart, Vincent, 1998. "“Some Lessons for Policy Makers Who Deal with the Mixed Blessing of Capital Inflows,”," MPRA Paper 7123, University Library of Munich, Germany.
  13. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1996. "Inflows of capital to developing countries in the 1990s," MPRA Paper 13707, University Library of Munich, Germany.
  14. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1994. "Inflows of Capital to Developing Countries in the 1990s: Causes and Effects," IDB Publications (Working Papers) 5718, Inter-American Development Bank.
  15. Reinhart, Vincent R, 2000. "How the Machinery of International Finance Runs with Sand in Its Wheels," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 74-85, February.
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