Capital flows

50. The expansion of capital flows, including ODA, other official capital flows and private capital, was essential.

Capital flows and remittances

Capital flows and errors

C. Investment and capital flows

Official flows are an important supplement to private capital flows.

Private sector capital flows now dwarf traditional public sector aid flows.

Encouraging private capital flows and remittances

Afterward, capital flows to developing countries stagnated.

E. The international environment Financial liberalization and capital flows

Table 2 Private capital flows to Africa, 1998 2003

Policies to counter pro cyclicality of international capital flows

a. avoid destabilising capital flows to maximise benefits from globalised capital markets, thereby minimising risk

In 2003, net private capital flows to developing countries had remained positive and continued to be the largest component of capital flows to such countries.

Prudential controls on capital flows make a lot of sense.

But even though net international capital flows are going the wrong way, there are still substantial gross capital flows outward from the world economy s core to its periphery.

The spreads are necessary to keep capital flows within the eurozone in check. Before the introduction of the euro, capital flows had been limited by uncertainty about exchange rates.

Private capital flows have come to play the dominant role in development finance, eclipsing both official bilateral and multilateral flows.

Private capital flows have exploded since, dwarfing trade in goods and services.

Freeing up capital flows had an inexorable logic or so it seemed.

Net private capital flows, particularly to developing economies, have become more volatile.

The global integration of trade and finance has facilitated these capital flows.

The lack of effective global economic governance has important implications for capital flows.

Obviously, it requires that governments renounce direct restrictions on trade and capital flows.

Official development financing could play a catalytic role in encouraging such capital flows.

But even though net international capital flows are going the wrong way, there are still substantial gross capital flows outward from the world economy s core to its periphery. And we can hope that these capital flows will carry with them the institutions and managerial expertise that have made the core so wealthy.

Given that international capital flows had restarted, they did not fear immediate external constraints.

Private capital flows play an increasingly important role in supplementing developing countries' domestic resources.

The importance of remittances relative to other capital flows varies considerably across receiving countries.

Trade, private capital flows, remittances and private transfers currently dwarfed amounts contributed through aid.

This is the mighty River Nile as it flows through the Egyptian capital, Cairo.

And, to address volatile capital flows, countries should increase exchange rate flexibility, maintain adequate international reserves, and implement carefully designed capital controls.

Pick any indicator trade relative to global GDP, capital flows relative to the global capital stock, and so forth all are rising.

When international private capital flows proceeded from countries with abundant capital resources to countries lacking capital and helped smooth out external shocks, they could in fact stimulate development.

Strauss Kahn s response that taxes on capital flows are costly and ineffective is therefore unfortunate.

Witness the surge in capital flows to emerging markets as investors chase higher financial returns.

(iv) Initiate measures that mitigate the impact of excessive volatility of short term capital flows.

Capital controls, whatever their benefits in terms of mitigating the risks associated with volatile capital flows, are costly in a variety of ways.

The taboo that has attached to capital controls has discouraged practical, policy oriented work that would help governments to manage capital flows directly.

Referring to capital controls, John Maynard Keynes famously said what used to be heresy restrictions on capital flows is now endorsed as orthodoxy.

Private capital, which accounts for more than 90 of capital flows to developing economies, will remain the dominant source of long term financing.

17. In Latin America, the reversal in the trend of net capital flows in the 1990s included a considerable amount of capital repatriation.

This has increased the vulnerability of many emerging markets to a sharp reversal in capital flows.

To some extent, this is understandable, given the focus on short term liquidity and capital flows.

All these measures must be implemented taking into consideration that remittances constitute private flows of capital.