2003 Reports

Capital Flows and Macroeconomic Policy in Emerging Economies

Agosin, Manuel R.

In emerging economies, capital flows are large relative to the domestic economy and very volatile, making the normal tasks of macroeconomic management exceedingly difficult. This paper argues in favor of explicit policies to regulate the size and volatility of capital flows into developing economies. The paper also derives implications for exchange rate, monetary, and fiscal policies and for banking regulation.