## 2. Capital Flows to Sub-Saharan Africa: Causes and Consequences

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### Global and domestic determinants of flows
- Global factors:
  - Lower US interest rates and higher commodity prices encourage inflows.
  - Global market volatility has a more pronounced effect on foreign portfolio investment.
  - US interest rates and commodity prices have a stronger effect on FDI.
- Empirical magnitudes:
  - A 100 basis point decline in the nominal US government bond yield, on average, implies an increase in net flows by about 0.2 to 0.4 of a percent of GDP.
  - A 100 basis point decline in the US government bond yield, on average, increases nonresident flows by about 0.3 to 0.5 of a percent of GDP.
  - A 10 percent increase in the commodity price index implies an increase in nonresident flows by about 0.2 to 0.3 of a percent of GDP.
  - A 100 basis point reduction in the US government bond yield, for example, implies an increase of about 0.2 percent of GDP of FDI (figure-based result).
- Domestic characteristics that attract inflows:
  - Strong economic growth (measured by real GDP growth).
  - Greater trade openness.
  - Higher real GDP per capita.
  - Better institutional quality.
  - Greater need for external financing.
  - Countries with higher external debt receive fewer inflows.

### Evolution and scale of capital flows
- Levels and trends:
  - Nonofficial net capital flows to sub-Saharan Africa: about $4 billion during the 1980s and 1990s.
  - Increased six-fold to $25 billion in 2007.
  - Doubled to about $60 billion in 2017.
- In percent of GDP:
  - Net capital flows to sub-Saharan Africa have been at a historically high level (3 percent of GDP) and exceeded those to emerging market economies (by about 2 percent of GDP) in 2015–17.
- Liability (nonresident) flows:
  - Increased from $70 billion in 2007 to $113 billion in 2017.
- Stocks and composition:
  - Five-fold increase in the stock of external liabilities for sub-Saharan Africa since 2000.
  - Stock of external debt has more than doubled since 2000.
  - Share of short-term debt in total external debt increased from about 8 percent in the early 2000s to 14 percent in the last few years.
  - Sub-Saharan Africa’s external debt is dominated by the public sector, with the share of public debt in total external debt, on average, amounting to about 80 percent in 2017.
- Sectoral and geographic shifts:
  - FDI recipients shifted away from concentration in extractive sectors in the 1980s and 1990s to a broader spread across manufacturing and services in recent years.
  - Since the global financial crisis, the share of flows received by non-resource-intensive, mostly low-income countries has increased.
  - Côte d’Ivoire, Ethiopia, Kenya, and Mauritius together received more than 40 percent of the inflows during 2015–17.
  - The average net flow received by sub-Saharan Africa countries: about 0.5 of a percent of GDP in 2000; increased to 3 percent in 2007; further to 5 percent in 2017.

### Volatility and surges
- Volatility patterns:
  - As magnitude of flows increased, volatility increased; nonresident flows’ volatility rose more sharply than resident flows’.
  - Nonresident flows are more volatile than resident flows; among categories, other investment is the most volatile, followed by FDI.
- Surges:
  - A larger number of countries are experiencing episodes of large inflows—or “surges”—defined as net capital flows (scaled by GDP) that lie in both the country’s own and the sub-Saharan Africa sample’s top one-third of observations.
  - Typically surges are driven by changes in nonresident flows.
  - Among countries that experienced an inflow surge after the recent oil price collapse, most are non-resource-intensive countries (and none was an oil exporter in 2016).
- Volatility (median of standard deviation of flows, percent of GDP; outliers excluded). Values reported in the source:
  - Net Financial Flows: 5.66; 3.07; 5.73; 4.13; 3.98; 3.76
  - Net FDI: 2.16; 1.09; 2.36; 1.44; 1.13; 1.21
  - Net portfolio: 0.68; 0.08; 0.59; 1.61; 1.22; 1.84
  - Net other investment: 3.85; 2.61; 3.61; 3.25; 3.30; 2.62
  - Liability Flows: 4.78; 2.75; 4.39; 3.78; 4.56; 3.24
  - FDI (liability): 2.54; 0.96; 2.28; 1.49; 1.31; 1.10
  - Portfolio (liability): 0.28; 0.03; 0.35; 1.53; 0.89; 1.57
  - Other investment (liability): 3.34; 2.15; 3.38; 2.81; 2.93; 1.61
  - Asset Flows: 2.92; 1.69; 2.72; 1.94; 1.12; 1.93
  - FDI (asset): 0.27; 0.08; 0.28; 0.70; 0.18; 0.71
  - Portfolio (asset): 0.21; 0.03; 0.18; 0.78; 0.20; 0.83
  - Other investment (asset): 1.83; 1.33; 2.15; 1.64; 1.09; 1.66

### Macro-financial consequences by flow type
- Aggregate assessment:
  - No strong evidence that nonresident flows in aggregate are significantly associated with macroeconomic or financial imbalances in sub-Saharan Africa; the type of flow matters.
- Portfolio inflows:
  - Portfolio inflows are likely to move the real exchange rate and real output above trend, and to fuel credit growth—vulnerabilities that tend to raise the likelihood of a financial crisis.
  - Historically, portfolio flows have not been strongly associated with domestic investment or economic growth, though they do seem to boost public consumption (including social spending).
  - Quantitative associations: A 1 percent of GDP increase in portfolio inflows is associated with:
    - 0.3 of a percentage point larger real exchange rate appreciation relative to trend.
    - 0.2 of a percentage point wider gap between real output and trend.
    - 0.1 percent of GDP increase in credit to the private sector.
- Foreign Direct Investment (FDI):
  - Inward FDI appears to directly spur domestic investment, and in turn support economic growth.
  - Quantitative associations: A 1 percent of GDP increase in FDI implies about a 0.5 of a percentage point higher investment ratio.
  - A 1 percent of GDP higher level of FDI lifts the short-run economic growth rate by about 0.1 of a percentage point.
- Resident outflows and errors & omissions:
  - Domestic residents continued to invest abroad on a net basis.
  - In percent of GDP, sub-Saharan Africa’s asset flows are on par with emerging market economies, while the errors and omissions category has been much larger, especially since 2005, and largely accounted for by the region’s oil exporters.

### Policy implications and recommendations
- Manage capital-flow composition and domestic use:
  - Macroeconomic management should account for the nature of the capital (FDI, portfolio, loans, etc.), its domestic use and impact, and the type of investor and borrower.
- Prudence in sovereign borrowing:
  - As sub-Saharan Africa sovereigns increasingly tap international capital markets to finance development initiatives, policymakers need to be prudent in ensuring borrowed resources are utilized effectively, enhance productivity and promote economic growth.
- Exchange rate and competitiveness considerations:
  - Policymakers need to be mindful of exchange rate consequences such as volatility and misalignments that could hurt the tradable sector and undermine competitiveness.
  - Structural policies to reduce nominal rigidities and facilitate real exchange rate adjustment could play a useful role.
  - In some cases foreign exchange intervention to limit currency overvaluation and build adequate reserve buffers may be warranted.
- Macroprudential and fiscal vigilance:
  - Vigilance is warranted against economic overheating and the buildup of (private and public sector) balance sheet vulnerabilities to mitigate the risk of a hard landing when flows recede.
  - Countercyclical macroeconomic and prudential policies should be adopted to limit such vulnerabilities and preserve debt sustainability.
- Data and FDI promotion:
  - Improving the compilation and timeliness of balance of payments data is critical to monitor flows in real time and to implement desirable policy actions swiftly.
  - Given FDI’s lower propensity to generate vulnerabilities and higher likelihood of energizing private investment and growth, efforts should focus on attracting direct investment through strong domestic macroeconomic fundamentals and an improved business climate.
- Forward-looking note:
  - Strong fundamentals and a better business climate are likely to play an even more important role in attracting foreign capital going forward, as global financial conditions may tighten with the normalization of monetary policy in advanced economies.

### Foreign Direct Investment (selected additional findings)
- Global drivers and surge/reversal dynamics:
  - A 100 basis point increase in the US interest rate (around the mean) lowers the likelihood of an inflow surge by about 2 percentage points, and raises the likelihood of a large reversal by 2 percentage points (against an unconditional surge and reversal probability of about 20 percent in the estimated sample).
  - A 10 percent increase in the international commodity price index strongly increases the likelihood of a surge across sub-Saharan Africa, but has a statistically significant effect on the probability of a reversal only in resource-intensive countries.
  - A one standard deviation shock to the global market volatility index reduces portfolio flows to sub-Saharan Africa by about 0.1 percent of GDP but has no statistically significant effect on FDI.
- High-frequency global financial cycle evidence (2000–17):
  - A one standard deviation shock to the VIX index (in log terms) reduces fund flows by about 0.4 of a percent of GDP, increases bond yields by about 20 basis points, and lowers real stock returns by about 2 percentage points.
  - A 100 basis point increase in the US government bond yield is associated with a reduction in fund flows of about 1 percent of GDP, a proportionate increase in bond yields, and a decline in real stock returns by about 1 percentage point.
  - Sensitivity to global factors generally increased since the global financial crisis: since the crisis a 100 basis point increase in the US government bond yield implies a reduction in flows of about 1 percent of GDP and a rise in bond yields of about 115 basis points (whereas pre-crisis the impact was statistically negligible).
- Domestic determinants and heterogeneity:
  - Domestic factors raising surge likelihood and lowering reversal likelihood include higher real GDP growth, better institutional quality, and more flexible exchange rate regimes (note: this contrasts with evidence for emerging market economies where fixed regimes receive larger inflows).
- Risks and financial stability considerations:
  - Volatility of nonofficial liability flows (especially portfolio and other investment) can create currency overvaluation and tradable-sector competitiveness losses, economic overheating, rapid credit growth and associated balance sheet vulnerabilities.
  - Rapid credit expansion in low-income contexts can erode asset quality, create excessive sectoral concentration, and foster political lending; this underlines the need for effective credit risk monitoring and management capacity.
- Policy emphasis:
  - Manage flows with attention to their nature and domestic deployment.
  - Strengthen macroprudential frameworks, fiscal prudence, balance of payments data compilation, and policies to attract FDI through macro stability and improved business climate.

*Prepared by a team led by Mahvash S. Qureshi and composed of Francisco Arizala, Xiangming Fang, and Mustafa Yenice.*

### 2. Capital Flows to Sub-Saharan Africa:

### 2. Capital Flows to Sub-Saharan Africa: Causes and Consequences

### Global and domestic determinants of flows
- Global factors play an important role: lower US interest rates and higher commodity prices encourage inflows; global market volatility has a more pronounced effect on foreign portfolio investment, while US interest rates and commodity prices have a stronger effect on FDI.
- Empirical magnitudes reported:
  - A 100 basis point decline in the nominal US government bond yield, on average, implies an increase in net flows by about 0.2 to 0.4 of a percent of GDP.
  - A 100 basis point decline in the US government bond yield, on average, increases nonresident flows by about 0.3 to 0.5 of a percent of GDP.
  - A 10 percent increase in the commodity price index implies an increase in nonresident flows by about 0.2 to 0.3 of a percent of GDP.
  - A 100 basis point reduction in the US government bond yield, for example, implies an increase of about 0.2 percent of GDP of FDI (figure-based result).
- Domestic characteristics that attract inflows:
  - Strong economic growth (measured by real GDP growth), greater trade openness, higher real GDP per capita, better institutional quality, and greater need for external financing.
  - Countries with higher external debt receive fewer inflows.

### Evolution and scale of capital flows
- Nonofficial net capital flows to sub-Saharan Africa:
  - About $4 billion during the 1980s and 1990s.
  - Increased six-fold to $25 billion in 2007.
  - Doubled to about $60 billion in 2017.
- In percent of GDP:
  - Net capital flows to sub-Saharan Africa have been at a historically high level (3 percent of GDP) and exceeded those to emerging market economies (by about 2 percent of GDP) in 2015–17.
- Liability (nonresident) flows:
  - Increased from $70 billion in 2007 to $113 billion in 2017.
- Stocks and composition:
  - Five-fold increase in the stock of external liabilities for sub-Saharan Africa since 2000.
  - Stock of external debt has more than doubled since 2000.
  - Share of short-term debt in total external debt increased from about 8 percent in the early 2000s to 14 percent in the last few years.
  - Sub-Saharan Africa’s external debt is dominated by the public sector, with the share of public debt in total external debt, on average, amounting to about 80 percent in 2017.
- Sectoral shifts:
  - FDI recipients shifted away from being concentrated in extractive sectors in the 1980s and 1990s to a broader spread across manufacturing and services in recent years.
- Geographic and country patterns:
  - Since the global financial crisis, the share of flows received by non-resource-intensive, mostly low-income countries has increased.
  - Côte d’Ivoire, Ethiopia, Kenya, and Mauritius together received more than 40 percent of the inflows during 2015–17.
  - The average net flow received by sub-Saharan Africa countries: about 0.5 of a percent of GDP in 2000; increased to 3 percent in 2007; further to 5 percent in 2017.

### Volatility and surges
- Increase in volatility:
  - As magnitude of flows increased, volatility increased; nonresident flows’ volatility rose more sharply than resident flows’.
  - Nonresident flows are more volatile than resident flows; among categories, other investment is the most volatile, followed by FDI.
- Surges:
  - A larger number of countries are experiencing episodes of large inflows—or “surges”—defined as net capital flows (scaled by GDP) that lie in both the country’s own and the sub-Saharan Africa sample’s top one-third of observations.
  - Typically surges are driven by changes in nonresident flows.
  - Among countries that experienced an inflow surge after the recent oil price collapse, most are non-resource-intensive countries (and none was an oil exporter in 2016).
- Volatility table (median of standard deviation of flows, percent of GDP; outliers excluded). Values reported in the source:
  - Net Financial Flows: 5.66; 3.07; 5.73; 4.13; 3.98; 3.76
  - Net FDI: 2.16; 1.09; 2.36; 1.44; 1.13; 1.21
  - Net portfolio: 0.68; 0.08; 0.59; 1.61; 1.22; 1.84
  - Net other investment: 3.85; 2.61; 3.61; 3.25; 3.30; 2.62
  - Liability Flows: 4.78; 2.75; 4.39; 3.78; 4.56; 3.24
  - FDI (liability): 2.54; 0.96; 2.28; 1.49; 1.31; 1.10
  - Portfolio (liability): 0.28; 0.03; 0.35; 1.53; 0.89; 1.57
  - Other investment (liability): 3.34; 2.15; 3.38; 2.81; 2.93; 1.61
  - Asset Flows: 2.92; 1.69; 2.72; 1.94; 1.12; 1.93
  - FDI (asset): 0.27; 0.08; 0.28; 0.70; 0.18; 0.71
  - Portfolio (asset): 0.21; 0.03; 0.18; 0.78; 0.20; 0.83
  - Other investment (asset): 1.83; 1.33; 2.15; 1.64; 1.09; 1.66

### Macro-financial consequences by flow type
- Aggregate assessment:
  - No strong evidence that nonresident flows in aggregate are significantly associated with macroeconomic or financial imbalances in sub-Saharan Africa; but the type of flow matters.
- Portfolio inflows:
  - On average, portfolio inflows are likely to move the real exchange rate and real output above trend, and to fuel credit growth—vulnerabilities that tend to raise the likelihood of a financial crisis.
  - Historically, portfolio flows have not been strongly associated with domestic investment or economic growth, though they do seem to boost public consumption (including social spending).
- FDI:
  - Inward FDI appears to directly spur domestic investment, and in turn support economic growth.
- Resident outflows and errors & omissions:
  - Domestic residents continued to invest abroad on a net basis.
  - In percent of GDP, sub-Saharan Africa’s asset flows are on par with emerging market economies, while the errors and omissions category has been much larger, especially since 2005, and largely accounted for by the region’s oil exporters.

### Policy implications and recommendations
- Manage capital-flow composition and domestic use:
  - Careful macroeconomic management of capital flows should take into account the nature of the capital (FDI, portfolio, loans, etc.), its domestic use and impact, and the type of investor and borrower.
- Prudence in sovereign borrowing:
  - As sub-Saharan Africa sovereigns increasingly tap international capital markets to finance development initiatives, policymakers need to be prudent in ensuring borrowed resources are utilized effectively, enhance productivity and promote economic growth.
- Exchange rate and competitiveness considerations:
  - In attracting foreign capital, policymakers need to be mindful of attendant consequences for exchange rates such as volatility and misalignments that could hurt the tradable sector and undermine competitiveness.
  - Structural policies to reduce nominal rigidities and facilitate real exchange rate adjustment could play a useful role.
  - In some cases foreign exchange intervention to limit currency overvaluation and build adequate reserve buffers may be warranted.
- Macroprudential and fiscal vigilance:
  - Vigilance is warranted against economic overheating and the buildup of (private and public sector) balance sheet vulnerabilities to mitigate the risk of a hard landing when flows recede.
  - Countercyclical macroeconomic and prudential policies should be adopted to limit such vulnerabilities and preserve debt sustainability.
- Data and FDI promotion:
  - Improving the compilation and timeliness of balance of payments data is critical to monitor flows in real time and to implement desirable policy actions swiftly.
  - Given FDI’s lower propensity to generate vulnerabilities and higher likelihood of energizing private investment and growth, efforts should focus on attracting direct investment through strong domestic macroeconomic fundamentals and an improved business climate.
- Forward-looking note:
  - These factors (strong fundamentals, business climate) are likely to play an even more important role in attracting foreign capital going forward, as global financial conditions may tighten with the normalization of monetary policy in advanced economies.

*Prepared by a team led by Mahvash S. Qureshi and composed of Francisco Arizala, Xiangming Fang, and Mustafa Yenice.*

### 1. Foreign Direct Investment

### 1. Foreign Direct Investment

### Global drivers of capital flows and surge/reversal dynamics
- Global factors are important drivers of capital flows to sub-Saharan Africa; their effects differ by flow type:
  - A 100 basis point increase in the US interest rate (around the mean) lowers the likelihood of an inflow surge by about 2 percentage points, and raises the likelihood of a large reversal by 2 percentage points (against an unconditional surge and reversal probability of about 20 percent in the estimated sample).
  - A 100 basis point decline in the 10-year US government bond yield increases direct and portfolio investment liability flows (see regression setup described in source notes).
  - A 10 percent increase in the international commodity price index strongly increases the likelihood of a surge across sub-Saharan Africa, but has a statistically significant effect on the probability of a reversal only in resource-intensive countries.
  - A one standard deviation shock to the global market volatility index reduces portfolio flows to sub-Saharan Africa by about 0.1 percent of GDP but has no statistically significant effect on FDI.

- Global financial cycle connections (high-frequency evidence, 2000–17):
  - A one standard deviation shock to the VIX index (in log terms) reduces fund flows by about 0.4 of a percent of GDP, increases bond yields by about 20 basis points, and lowers real stock returns by about 2 percentage points.
  - A 100 basis point increase in the US government bond yield is associated with a reduction in fund flows of about 1 percent of GDP, a proportionate increase in bond yields, and a decline in real stock returns by about 1 percentage point.
  - Sensitivity to global factors generally increased since the global financial crisis: since the crisis a 100 basis point increase in the US government bond yield implies a reduction in flows of about 1 percent of GDP and a rise in bond yields of about 115 basis points (whereas pre-crisis the impact was statistically negligible).

### Domestic determinants and heterogeneity
- Domestic factors raising surge likelihood and lowering reversal likelihood:
  - Higher real GDP growth.
  - Better institutional quality.
  - More flexible exchange rate regimes (note: this contrasts with evidence for emerging market economies where fixed regimes receive larger inflows).
- Empirical patterns by flow type:
  - Portfolio flows are more sensitive to global market volatility and tend to be more volatile.
  - FDI responds more to global interest rates and commodity prices and is less volatile.

### Macroeconomic consequences by flow type
- Portfolio (nonresident) flows: associated with macroeconomic vulnerabilities
  - A 1 percent of GDP increase in portfolio inflows is associated with:
    - 0.3 of a percentage point larger real exchange rate appreciation relative to trend.
    - 0.2 of a percentage point wider gap between real output and trend.
    - 0.1 percent of GDP increase in credit to the private sector.
  - Portfolio flows show little evidence of being significantly associated with domestic investment (public or private) or economic growth on average, though they are positively associated with public consumption (including social spending).
- Foreign Direct Investment (FDI): associated with investment and growth
  - A 1 percent of GDP increase in FDI implies about a 0.5 of a percentage point higher investment ratio.
  - A 1 percent of GDP higher level of FDI lifts the short-run economic growth rate by about 0.1 of a percentage point.
  - FDI thus appears to directly spur domestic investment, which in turn is associated with higher growth prospects.

### Risks, vulnerabilities, and financial stability considerations
- The volatility of nonofficial liability flows (especially portfolio and other investment) can create:
  - Currency overvaluation and tradable-sector competitiveness losses.
  - Economic overheating.
  - Rapid credit growth and associated balance sheet vulnerabilities.
- Rapid credit expansion in low-income contexts poses key threats: erosion of asset quality, excessive sectoral concentration, and political lending; this underlines the need for effective credit risk monitoring and management capacity.
- Although increased domestic credit can reflect improved access to financial services given generally low financial development, it still requires vigilance to avoid instability.

### Policy implications and recommendations
- Manage capital flows with attention to the nature of flows, their domestic use, and investor/borrower type.
- When sovereigns tap international capital markets for development:
  - Be prudent in borrowing and ensure resources enhance productivity and growth.
  - Monitor attendant exchange rate consequences (instability and misalignments) that could hurt the tradable sector.
  - Consider structural policies to reduce nominal rigidities and facilitate real exchange rate adjustment.
  - In some cases, foreign exchange intervention to limit currency overvaluation and build adequate reserve buffers may be warranted.
- Adopt countercyclical macroeconomic and prudential policies to limit overheating and balance-sheet vulnerabilities, and to preserve debt sustainability.
- Strengthen compilation and timeliness of balance of payments data to monitor flows in real time and implement policy actions swiftly.
- Promote macroeconomic stability and an improved business climate to attract FDI, which is less prone to generating vulnerabilities and more likely to energize private investment and growth.
- Maintain vigilance as strong domestic fundamentals will become more important in attracting capital if global financial conditions tighten with monetary policy normalization in advanced economies.

*Source: IMF staff estimates and analysis as presented in the PDF chapter "1. Foreign Direct Investment" (ssareo-10-18-ch2).*

### 2. CAPITAL FLOWS TO SUB-SAHARAN AFRICA: CAUSES AND CONSEQUENCES

### 2. CAPITAL FLOWS TO SUB-SAHARAN AFRICA: CAUSES AND CONSEQUENCES

### Key references cited
- Aykut, D., A. Sanghi, and G. Kosmidou. 2017. “What to Do When Foreign Direct Investment is Not Direct or Foreign: FDI Round Tripping.” Policy Research Working Paper 8046, World Bank, Washington, DC.
- Caballero, J. 2016. “Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises?” The Economic Journal 126(591): 281–316.
- Calderon, C., N. Loayza, and L. Serven. 2004. “Greenfield Foreign Direct Investment and Mergers and Acquisitions—Feedback and Macroeconomic Effects.” Policy Research Working Paper 3192, World Bank, Washington, DC.
- Combes, J., T. Kinda, and P. Plane. 2012. “Capital Flows, Exchange Rate Flexibility, and the Real Exchange Rate.” Journal of Macroeconomics 34(4): 1034–043.
- Fofack, H., and L. Ndikumana. 2010. “Capital Flight Repatriation: Investigation of its Potential Gains for Sub‐Saharan African Countries.” African Development Review 22(1): 4–22.
- Forbes, K., and F. Warnock. 2012. “Capital Flow Waves: Surges, Stops, Flight, and Retrenchment.” Journal of International Economics 88(2): 235–51.
- Ghosh, A., and M. Qureshi. 2016. “Capital Inflow Surges and Consequences.” ADBI Working Paper 585, Asian Development Bank Institute, Tokyo.
- Ghosh, A., J. Ostry, and M. Qureshi. 2015. “Exchange Rate Management and Crisis Susceptibility: A Reassessment.” IMF Economic Review 63(1): 238–76.
- Ghosh, A., J. Ostry, and M. Qureshi. 2016. “When Do Surges End in Tears?” American Economic Review Papers and Proceedings 106(5): 581–85.
- Ghosh, A., J. Ostry, and M. Qureshi. 2017. “Taming the Tide of Capital Flows: A Policy Guide.” MIT Press, Cambridge, MA.
- Ghosh, A., M. Qureshi, J. Kim, and J. Zalduendo. 2014. “Surges.” Journal of International Economics 92(2): 266–85.
- Gopalan, S., A. Ouyang, and R. Rajan. 2018. “Impact of Greenfield FDI versus M&A on Growth and Domestic Investment in Developing Asia.” Economia Politica: Journal of Analytical and Institutional Economics 35(1): 41–70.
- Gourinchas, P., and M. Obstfeld, 2012, “Stories of the Twentieth Century for the Twenty-First.” American Economic Journal: Macroeconomics 4(1): 226–65.
- International Monetary Fund (IMF). 2014. “Macroeconomic Developments in Low-Income Developing Countries.” Washington, DC.
- Korinek, A. 2018. “Regulating Capital Flows to Emerging Markets: An Externality View.” Journal of International Economics 111(C): 61–80.
- Magud, N., C. Reinhart, and E. Vesperoni. 2014. “Capital Inflows, Exchange Rate Flexibility and Credit Booms.” Review of Development Economics 18(3): 415–30.
- Ndikumana, L., and J. Boyce. 2003. “Public Debts and Private Assets: Explaining Capital Flight from Sub-Saharan African Countries.” World Development 31(1): 107–30.
- Obstfeld, M., J. Ostry, and M. Qureshi. 2017. “A Tie that Binds: Revisiting the Trilemma in Emerging Market Economies.” IMF Working Paper 7/130, Washington, DC.
- Qureshi, M., and N. Sugawara. 2018. “Surges and Reversals in Capital Flows.” International Review of Economics & Finance 56(C): 92–98.
- Rey, H. 2013. “Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence.” Proceedings Federal Reserve Bank of Kansas City Economic Policy Symposium, Jackson Hole, 285–333.
- United Nations Conference on Trade and Development (UNCTAD). 2017. World Investment Report. Geneva.

### Additional notes from the chapter metadata
- Note: Annex with additional figures and results for this chapter is available online.
- International Monetary Fund (IMF). 2018. Chapter 2, Background Paper, Regional Economic Outlook: Sub-Saharan Africa. Washington, DC, October. https://www.imf.org/en/Publications/REO/SSA/Issues/2018/09/20/sreo1018

*References as listed in the chapter*

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_Source: https://www.imf.org/-/media/files/publications/reo/afr/2018/october/pdf/ssareo-10-18-ch2.pdf_