Why is financial stability essential for key currencies in the international monetary system?

Linda Goldberg, Signe Krogstrup, John Lipsky, Hélène Rey, 26 July 2014

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Could the dollar lose its status as the key international currency for international trade and international financial transactions, and if so, what would be the principal contributing factors? Speculation about this issue has long been abundant, and views diverse. After the introduction of the euro, there was much public debate about the euro displacing the dollar (Frankel 2008).

Topics: Financial markets, International finance
Tags: capital flows, Currency, dollar, financial stability, reserve currency, SIFIs, spillovers

Do capital controls deflect capital flows?

Paolo Giordani, Michele Ruta, Hans Weisfeld, Ling Zhu, 23 June 2014

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The size and volatility of capital flows to developing countries have increased significantly in recent years (Figure 1), leading many economists to argue that national policies and multilateral institutions are needed to govern these flows (Forbes and Klein 2013, Blanchard and Ostry 2012).

Topics: International finance
Tags: Brazil, capital controls, capital flows, Capital inflows, China, international capital flows, South Africa, spillovers

Capital controls in the 21st century

Barry Eichengreen, Andrew K Rose, 5 June 2014

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Capital controls are back. The IMF (2012) has softened its earlier opposition to their use. Some emerging markets – Brazil, for example – have made renewed use of controls since the global financial crisis of 2008–2009.

Topics: International finance
Tags: capital, capital controls, capital flows, global financial crisis, IMF, Macroprudential policy

Turmoil in emerging markets: What’s missing from the story?

Kristin Forbes, 5 February 2014

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Emerging markets are going through another period of volatility – and the most popular boogeyman is the US Federal Reserve.

Topics: International finance
Tags: capital flows, emerging markets, Federal Reserve, global financial crisis, tapering

Why fiscal sustainability matters

Willem Buiter, 10 January 2014

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Does fiscal sustainability matter only when there is a fiscal house on fire, as was the case with the Greek sovereign insolvency in 2011–12? Far from it.

Topics: Financial markets, Global crisis, International finance, Macroeconomic policy
Tags: balance-sheet recession, banking, banking union, banks, capital flows, credit booms, Currency wars, emerging markets, eurozone, Eurozone crisis, financial crisis, fiscal policy, fiscal sustainability, global financial crisis, sovereign debt, sovereign debt restructuring

The next sudden stop

Sebnem Kalemli-Ozcan, 7 January 2014

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The ominous facts are well known – the strongest predictors of financial crises are domestic credit booms and external debts (Reinhart and Rogoff 2011). In emerging markets, credit booms are generally preceded by large capital inflows (Reinhart and Reinhart 2010).

Topics: Financial markets, International finance
Tags: capital flows, emerging markets, global financial crisis, liability dollarisation, sudden stops, tapering, Turkey

Investment in the wake of crises: Asia 15 years later

Carmen M Reinhart, Takeshi Tashiro, 17 December 2013

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However straightforward the role of investment as a shock absorber in a time of crisis, it is perplexing why it takes so many years to recover afterwards – if it recovers at all. A prolonged investment slump is not a new phenomenon following a deep crisis.

Topics: International finance
Tags: Asian crisis, capital flows, sudden stop

Capital inflows and booms in asset prices: Going beyond the current account

Eduardo Olaberría, 7 December 2013

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For decades, policymakers’ perception has been that large capital inflows can fuel booms in asset prices. If this were true, bonanzas in capital inflows would imply an important risk to financial stability, since booms in asset prices are leading indicators of financial crises.

Topics: Financial markets, International finance
Tags: asset prices, booms, bubbles, capital flows, Capital inflows, current account

The impossible trinity, yet again

Stephen Grenville, 26 November 2013

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Starting point of the impossible trinity

Topics: Macroeconomic policy, Monetary policy
Tags: capital flows, exchange rate, Impossible trinity, portfolios

Should Brazil’s central bank be selling foreign reserves?

Márcio Garcia, 25 September 2013

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The US dollar’s rise in August and the Brazilian Central Bank’s (BCB) interventions in forex markets have started a debate about whether the BCB should keep on intervening as it has been doing, mostly via currency derivatives markets, or if it should also be selling its international reserves.

Topics: Exchange rates, International finance
Tags: Brazil, capital flows, Central Banks, derivatives, exchange rates

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