Financial Flows and Exchange Rates: Challenges Faced by Developing Countries

Abstract

With the global financial crisis, emerging developing countries have been experiencing marked cycles of capital flows: significant inflows until the collapse of Lehman Brothers; a sudden outflow in the sequence; a rebound of inflows some months after; and, more recently, more short-lived periods of risk aversion and outflows due to the problems concerning the Euro. This period has been of singular intensity, with cycles changing much more rapidly than previously. The different intensity has major implications for understanding the process, especially regarding the relative importance of push and pull factors and the formulation of policy options. (…)