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Article: Surges in Capital Inflows: boon or curse?
- Article from:
- Finance & Development
- Article date:
- March 1, 1994
- Author:
CopyrightCOPYRIGHT 1994 International Monetary Fund. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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THE RECENT surges in capital inflows to several countries have held the promise of significantly increasing investment and growth in these countries but also can pose the threat of financial instability. To fashion an appropriate policy response, policymakers need to carefully identify the circumstances that give rise to these inflows.
The surge in capital inflows in recent years--particularly in some Asian, Latin American, and Middle Eastern countries--has led to large increases in foreign reserves, sometimes after years of tight external financing constraints, holding the potential for higher investment and growth in these countries. But too much of a good thing can ...