Are Capital Inflows Expansionary or Contractionary? Theory, Policy Implications, and Some Evidence

Olivier Blanchard, Jonathan D. Ostry, Atish R. Ghosh, Marcos Chamon

NBER Working Paper No. 21619
Issued in October 2015
NBER Program(s):   DEV   IFM   ITI   ME

The workhorse open-economy macro model suggests that capital inflows are contractionary because they appreciate the currency and reduce net exports. Emerging market policy makers however believe that inflows lead to credit booms and rising output, and the evidence appears to go their way. To reconcile theory and reality, we extend the set of assets included in the Mundell-Fleming model to include both bonds and non-bonds. At a given policy rate, inflows may decrease the rate on non-bonds, reducing the cost of financial intermediation, potentially offsetting the contractionary impact of appreciation. We explore the implications theoretically and empirically, and find support for the key predictions in the data.

对此论文的科普文章 ：Expansionary or contractionary effects of capital inflows: It depends what kind

Olivier Blanchard, Jonathan D Ostry, Atish R Ghosh, Marcos Chamon 26 November 2015

  Some scholars view capital inflows as contractionary, but many policymakers view them as expansionary. Evidence supports the policymakers. This column introduces an analytic framework that knits together the two views. For a given policy rate, bond inflows lead to currency appreciation and are contractionary, while non-bond inflows lead to an appreciation but also to a decrease in the cost of borrowing, and thus may be expansionary.

http://www.voxeu.org/article/macro-effects-capital-inflows-capital-type-matters