Ghosh, Swati R2012-08-132012-08-132010-06https://hdl.handle.net/10986/10177In the wake of the recent global financial crisis, emerging markets have seen a significantly higher degree of volatility in their capital flows. At the onset, all countries experienced sudden stops and increases in risk premia. Following this initial period of uncertainty, financial markets began to differentiate between the countries, and while most developing regions have regained access to both, debt and equity issuance, the pace of recovery of capital inflows has been particularly remarkable for some countries. Given the likelihood that the prevailing low interest rates in the developed world will remain for some time to come, and given the prospects of faster growth in emerging markets, it is likely that some emerging markets will experience significant surges in capital flows in the near future. This note examines potential policy responses to maintain macroeconomic and financial sector stability in the face of increased capital inflows.CC BY 3.0 IGOADVANCED COUNTRIESADVANCED ECONOMIESAGGREGATE DEMANDASSET CLASSESASSET PRICEASSET PRICESASSETSBALANCE SHEETBALANCE SHEETSBANK CREDITBANK FOR INTERNATIONAL SETTLEMENTSBANK LENDINGBANK PORTFOLIOSBANK PROFITABILITYBANK REGULATIONBANKING SECTORBANKING SYSTEMBANKING SYSTEMSBONDBOND MARKETBONDSCAPITAL ACCOUNTCAPITAL ADEQUACYCAPITAL CONTROLSCAPITAL FLOWCAPITAL FLOWSCAPITAL INFLOWCAPITAL INFLOWSCAPITAL MOBILITYCAPITAL RATIOSCAPITAL REQUIREMENTSCENTRAL BANKCENTRAL BANKINGCERTIFICATES OF DEPOSITCOLLATERALCOMMERCIAL BANKSCOMMERCIAL PAPERCOMPETITIVENESSCREDIBILITYCREDIT BOOMSCREDIT EXPANSIONCURRENT ACCOUNTCURRENT ACCOUNT IMBALANCESDEBTDEMAND GROWTHDEPOSITDEPOSITSDEVELOPING COUNTRIESDOMESTIC BANKSDOMESTIC ECONOMYDOMESTIC INTEREST RATESECONOMIC CRISISECONOMIC REVIEWEMERGING ECONOMIESEMERGING MARKETSEMPIRICAL EVIDENCEEQUILIBRIUMEQUILIBRIUM CONDITIONSEQUITY ISSUANCEEXCHANGE RATEEXCHANGE RATE APPRECIATIONEXCHANGE RATE LEVELEXCHANGE RATE PEGEXCHANGE RATE REGIMEEXCHANGE RATE TARGETSEXPENDITURESEXPORT GROWTHEXPOSUREEXPOSURESEXTERNAL BORROWINGFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE BANK OF NEW YORKFINANCIAL CONSTRAINTSFINANCIAL CRISISFINANCIAL INNOVATIONFINANCIAL INSTABILITYFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL REFORMFINANCIAL REGULATIONFINANCIAL SECTORFINANCIAL SECTOR STABILITYFINANCIAL STABILITYFINANCIAL SYSTEMFISCAL POLICYFIXED EXCHANGE RATEFIXED EXCHANGE RATE REGIMEFOREIGN CURRENCYFOREIGN CURRENCY BORROWINGFOREIGN EXCHANGEFOREIGN EXCHANGE MARKETFOREIGN INTERESTFOREIGN INTEREST RATESGLOBAL LIQUIDITYGLOBAL TRADEGLOBALIZATIONGROWTH VOLATILITYHOLDINGSIMPORTINCOMEINFLATIONINFLATIONARY PRESSURESINTEREST RATEINTEREST RATE DIFFERENTIALSINTEREST RATESINTERNATIONAL LENDINGINTERNATIONAL SETTLEMENTSINVESTMENT RISKLEVERAGELIABILITYLIABILITY SIDELIBERALIZATIONLIBERALIZATIONSLIQUIDITYLIQUIDITY CONDITIONSLOANLOCAL MARKETSLOSS OF COMPETITIVENESSMACROECONOMIC CONDITIONSMACROECONOMIC MANAGEMENTMACROECONOMIC OBJECTIVESMACROECONOMIC POLICIESMACROECONOMIC POLICYMACROECONOMIC VOLATILITYMARKET INTERESTMARKET INTEREST RATEMARKET LIQUIDITYMARKET PARTICIPANTSMATURITYMATURITY MISMATCHESMONETARY POLICYMONETARY TRANSMISSIONMONEY SUPPLYMULTILATERAL TRADENOMINAL EXCHANGE RATEOPEN MARKETOPEN MARKET OPERATIONSOUTPUTOUTPUT LOSSESPOLICY OPTIONSPOLICY RESPONSESPOVERTY REDUCTIONPRICE INFLATIONPRIVATE CAPITALPRIVATE SECTORPRODUCTIVE INVESTMENTSPRUDENTIAL REGULATIONPRUDENTIAL REGULATIONSRAPID EXPORT GROWTHREAL ESTATEREAL ESTATE LENDINGREGULATORSREGULATORY FRAMEWORKSREGULATORY STRUCTURESRESERVERESERVE MONEYRESERVESRETURNRETURNSRISK PREMIARISK TAKINGRISK TOLERANCERISK-TAKING CAPACITYSAVINGSSTOCK MARKETSURCHARGESSYSTEMIC RISKTIGHT MONETARY POLICYTRADE FLOWSTRADE POLICYTRADINGTRADING PARTNERSTRANQUIL PERIODSTRANSACTIONTRANSPARENCYUNCERTAINTYUPWARD PRESSUREWORLD ECONOMYWorld Bank10.1596/10177