One of the most serious problems that a central bank in an emerging market economy can face, is the sudden reversal of capital inflows. Hoarding international reserves can be used to smooth the impact of such reversals, but these reserves are seldom sufficient and always expensive to hold. In...

Integration to international capital markets is one of the key pillars of development. However, capital flows also bring volatility to emerging markets. Are there mechanisms to reap the benefits of capital flows without being hurt by their volatility? Are current practices, such as large...