Capital Inflows, Exchange Rate Flexibility, and Domestic Credit

Reinhart, Carmen (2012): Capital Inflows, Exchange Rate Flexibility, and Domestic Credit. Published in: Vox EU (January 2012)

Abstract

Protracted expansionary monetary policies in advanced countries have renewed the debate over policy options to cope with large capital inflows that drive credit expansions in emerging economies. In a forthcoming paper, we show that during capital inflow bonanzas credit grows more rapidly and its composition tilts to foreign currency in economies with less flexible exchange rate regimes. Hence, carefully crafted macro-prudential measures may complement macroeconomic policies.

• Item Type: MPRA Paper
• Language: English
• Keywords: capital inflows, exchange rates, credit, banks, vulnerability, macroprudential, capital controls
• Subjects: F - International Economics > F0 - General; F - International Economics > F2 - International Factor Movements and International Business; F - International Economics > F3 - International Finance; F - International Economics > F6 - Economic Impacts of Globalization > F62 - Macroeconomic Impacts; G - Financial Economics > G0 - General > G01 - Financial Crises; N - Economic History > N2 - Financial Markets and Institutions > N25 - Asia including Middle East; N - Economic History > N2 - Financial Markets and Institutions > N26 - Latin America ; Caribbean

References

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