Are Capital Inflows Expansionary or Contractionary? Theory, Policy Implications, and Some Evidence / Olivier Blanchard, Jonathan Ostry, Atish Ghosh, Marcos Chamon.

Format:

Book

Government document

Author/Creator:

Blanchard, Olivier.

Contributor:

Chamon, Marcos.

Ghosh, Atish.

Ostry, Jonathan.

International Monetary Fund. Research Department, publisher.

Series:

IMF Working Papers; Working Paper ; No. 2015/226

IMF Working Papers

Language:

English

Subjects (All):

Capital movements--Econometric models.

Capital movements.

Monetary policy--Econometric models.

Monetary policy.

Physical Description:

1 online resource (25 pages)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2015.

Summary:

The workhorse open-economy macro model suggests that capital inflows are contractionary because they appreciate the currency and reduce net exports. Emerging market policy makers however believe that inflows lead to credit booms and rising output, and the evidence appears to go their way. To reconcile theory and reality, we extend the set of assets included in the Mundell-Fleming model to include both bonds and non-bonds. At a given policy rate, inflows may decrease the rate on non-bonds, reducing the cost of financial intermediation, potentially offsetting the contractionary impact of appreciation. We explore the implications theoretically and empirically, and find support for the key predictions in the data.

Contents:

Cover

Contents

I. Introduction

II. A Portfolio Model

2.1. The Demand for Assets

2.2. Equilibrium Conditions

III. FX Intervention, Capital Controls, and the Policy Rate

3.1. Sterilized Intervention

3.2. Capital Controls

3.3. Policy Rate

3.4. Some Remarks on the Choice of Instruments

IV. Some Empirical Evidence

Conclusions

Table 1. Effect of Capital Flows on GDP and Credit Growth

Figures

1. Increase in bond inflows, s_B&gt

0

2. Increase in non-bond inflows, s_N&gt

Data Appendix

References.

Notes:

"Research Department."

Includes bibliographical references.

Description based on publisher supplied metadata and other sources.

Description based on online resource; title from PDF title page (EBook Central, viewed June 23, 2025).

ISBN:

9781513549095

151354909X

9781513559292

151355929X

9781513563107

1513563106

OCLC:

926741939