Causes of Capital Inflows and Policy Responses to Them

Finance & Development, Vol. 34, No. 1, p. 3, March 1997

4 Pages Posted: 19 Jun 2005

See all articles by Sunil Sharma

Sunil Sharma

George Washington University - Elliott School of International Affairs

Nadeem Ul Haque

Pakistan Institute of Development Economics

Donald J. Mathieson

International Monetary Fund (IMF)

Abstract

In recent years, a number of developing and transition countries have enjoyed large inflows of foreign capital that have eased their financing contraints. Despite their obvious benefits, the inflows have aroused concern because of their potential effects on macroeconomic stability, the competitiveness of the export sector, and external viability. The most serious risks are that they will fuel inflation and drive the real effective exchange rate to unsustainably high levels. To design policies that will enable these developing countries to guard against the dangers, they need to identify what is driving the inflows. Some of the causes and policy responses of capital inflows to developing nations are discussed.

Keywords: Economic policy, Capital movement, Problems, LDCs, Economic impact, Policy making, Foreign investment, Capital investments, Economic development

Suggested Citation

Sharma, Sunil and Ul Haque, Nadeem and Mathieson, Donald J., Causes of Capital Inflows and Policy Responses to Them. Finance & Development, Vol. 34, No. 1, p. 3, March 1997, Available at SSRN: https://ssrn.com/abstract=744112

Sunil Sharma (Contact Author)

George Washington University - Elliott School of International Affairs ( email )

Institute for International Economic Policy
1957 E Street NW
Washington, DC 20052
United States

Nadeem Ul Haque

Pakistan Institute of Development Economics ( email )

Quaid-i-Azam University Campus, P.O. Box. 1091
Islamabad, Capital 44000
Pakistan
+92-51-9217879 (Phone)
+92-51-9210886 (Fax)

HOME PAGE: http://www.saneinetwork.net/structure/st_comm/NadeemUlHaque.asp

Donald J. Mathieson

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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