Capital Flows to Transition Economies : Master or Servant?

Author/Editor:

Leslie Lipschitz ; Alex Mourmouras ; Timothy D. Lane

Publication Date:

January 1, 2002

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 02/11

Subject:

English

Publication Date:

January 1, 2002

ISBN/ISSN:

9781451842791/1018-5941

Stock No:

WPIEA0112002

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

36

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