Coping with International Capital Flows

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Private capital flows to developing countries have increased dramatically in the 1990s. The authors identify key concerns about the sustainability and volatility of these flows and make a number of recommendations for national macroeconomic management including improving crisis prevention measures.



The Challenge for National Macroeconomic Management

The problem to be dealt with macroeconomically is one of aggregate demand running ahead of aggregate supply. The difficulty may simply be one of timing, as some Mexican policymakers maintained. Policy reforms and the associated investment may be properly directed towards increasing aggregate supply capacity for tradeable goods, but getting the additional production on stream takes time.


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