NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies

Graciela L. Kaminsky, Carmen M. Reinhart, Carlos A. Vegh

NBER Working Paper No. 10780
Issued in September 2004
NBER Program(s):   IFM

Based on a sample of 104 countries, we document four key stylized facts regarding the interaction between capital flows, fiscal policy, and monetary policy. First, net capital inflows are procyclical (i.e., external borrowing increases in good times and falls in bad times) in most OECD and developing countries. Second, fiscal policy is procyclical (i.e., government spending increases in good times and falls in bad times) for the majority of developing countries. Third, for emerging markets, monetary policy appears to be procyclical (i.e., policy rates are lowered in good times and raised in bad times). Fourth, in developing countries - and particularly for emerging markets - periods of capital inflows are associated with expansionary macroeconomic policies and periods of capital outflows with contractionary macroeconomic policies. In such countries, therefore, when it rains, it does indeed pour.

download in pdf format
   (420 K)

email paper

This paper is available as PDF (420 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10780

Published: When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies, Graciela L. Kaminsky, Carmen M. Reinhart, Carlos A. VĂ©gh. in NBER Macroeconomics Annual 2004, Volume 19, Gertler and Rogoff. 2005

Users who downloaded this paper also downloaded these:
Ilzetzki and Vegh w14191 Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?
Reinhart and Rogoff w13882 This Time is Different: A Panoramic View of Eight Centuries of Financial Crises
Reinhart and Rogoff w8963 The Modern History of Exchange Rate Arrangements: A Reinterpretation
Reinhart and Reinhart w14321 Capital Flow Bonanzas: An Encompassing View of the Past and Present
Reinhart, Rogoff, and Savastano w9908 Debt Intolerance
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us