Over the last few years, the debate on private capital flows and their management has regained momentum. This paper surveys the literature on the following private capital flows-related issues, with a focus on low-income countries: (i) impact on growth; (ii) risks; (iii) capital account management tools; and (iv) effectiveness of different policy measures.
Overall, the analysis confirms conventional wisdom according to which private capital flows (i.e. foreign direct investment, portfolio investment, cross-border bank lending), in some cases and under certain conditions, may carry important opportunities, but they are also a significant source of risks. Therefore, it is important to develop adequate and effective capital account management policy tools.
This review is part of the ‘Financial regulation in low-income countries: Balancing inclusive growth with financial stability’project
Isabella Massa (2014) Literature survey on capital account management in low-income countries. London: Overseas Development Institute
Published 1 November 2014