## Riding the Global Financial Cycle: How Capital Flows into LICs

_IMF Working Papers, August 28, 2026_

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## Bibliographic details
- Authors: Alexei Miksjuk, Yipei Zhang
- Published: August 28, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229059572.001

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### Summary findings
- As low-income countries (LICs) gain access to international capital markets, the scope for increased financing rises but so does the risk of shocks.
- After the global financial crisis (GFC), the global financial cycle has been a significant driver of private capital flows to LICs.
- A stronger US dollar (against advanced economy currencies) was associated with weaker net inflows to LICs.
- External government borrowing in LICs had a statistically significant but relatively small counter-cyclical component, inversely related to global financial and economic cycles, complementing policy responses to shocks.

### Empirical results and themes
- Global financial cycle: Identified as a significant driver of private capital flows to LICs in the post-GFC period.
- Exchange rate influence: Stronger US dollar (against advanced economy currencies) correlated with weaker net private inflows.
- External government borrowing: Exhibited a statistically significant but relatively small counter-cyclical response; borrowing was inversely related to global financial and economic cycles and served to complement policy responses to shocks.

### Policy implications and interpretation
- Increased access to international capital markets expands financing opportunities for LICs but raises exposure to global financial cycle shocks.
- Counter-cyclical external government borrowing can play a complementary role in policy responses to global financial and economic cycles, though its magnitude was found to be relatively small.

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_Source: https://www.imf.org/en/publications/wp/issues/2026/08/28/riding-the-global-financial-cycle-how-capital-flows-into-lics-579150_