Capital Flows and Financial Stability in Emerging Economies
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Evidence for the impact of international capital flows on the financial sector’s stability is mixed. This paper looks at the relationship between capital flows and financial stability in emerging economies.
The findings suggest that, after controlling for several macroeconomic factors, there are significant effects of different gross capital flow measures on the financial stability proxies, but they are not homogeneous across economies and across flow types. The paper proposes several country-specific financial and macroeconomic characteristics to help explain these differences.