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Capital Flows to Transition Economies: Master or Servant?
Author: Mr. Leslie Lipschitz, Mr. Alex Mourmouras, and Mr. Timothy D. Lane
Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 011
Language:
English
Publication Date:
01 Jan 2002
DOI:
https://doi.org/10.5089/9781451842791.001
ISBN:
9781451842791
ISSN:
1018-5941
Pages:
36
Keywords:
WP; capital; country; authority; capital flow; Central and Eastern Europe; capital flows; convergence; macroeconomic policy; capital scarcity; trend appreciation; deutsche mark; unfettered capital mobility; risk premia; nominal interest rate; real interest rate differential; appreciation vis-a-vis; physical capital; term capital control; capital mobility; appreciation result; Capital inflows; Real interest rates; Current account deficits; Exchange rate arrangements; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund