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The changing nature of capital flows | VOX, CEPR Policy Portal


Gaston Gelos, Lucyna Gornicka, Robin Koepke, Ratna Sahay, Silvia Sgherri
Gyrations in capital flows resurfaced in the wake of the Covid-19 crisis, and most emerging market economies (EMEs) saw significant outflows in the immediate aftermath of the shock (Corsetti and Marin 2020). Yet, financial turmoil proved to be short lived. Capital flows rebounded later in 2020, although not all EMEs benefitted equally. What might explain the resilience of EMEs to the shock and the nuanced rebound in flows this time around? A new report by the Committee on the Global Financial System (CGFS 2021) looks at some key trends and the underlying drivers of capital flows since the Global Crisis of 2007-09, including the related policy trade-offs and tools. The report builds on new empirical analyses, an extensive literature review, a survey of central banks, and roundtable discussions with academics and market participants.  ....

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