NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Esteban R. Vesperoni

International Monetary Fund
700 19 Street NW
Washington DC 20431

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NBER Working Papers and Publications

December 2011Capital Inflows, Exchange Rate Flexibility, and Credit Booms
with Nicolas E. Magud, Carmen M. Reinhart: w17670
The prospects of expansionary monetary policies in the advanced countries for the foreseeable future have renewed the debate over policy options to cope with large capital inflows that are, at least partly, driven by low interest rates in the financial centers. Historically, capital flow bonanzas have often fueled sharp credit expansions in advanced and emerging market economies alike. Focusing primarily on emerging markets, we analyze the impact of exchange rate flexibility on credit markets during periods of large capital inflows. We show that credit grows more rapidly and its composition tilts to foreign currency in economies with less flexible exchange rate regimes, and that these results are not explained entirely by the fact that the latter attract more capital inflows than economies...

Published: Nicolas E. Magud & Carmen M. Reinhart & Esteban R. Vesperoni, 2014. "Capital Inflows, Exchange Rate Flexibility and Credit Booms," Review of Development Economics, Wiley Blackwell, vol. 18(3), pages 415-430, 08. citation courtesy of

 
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