Emerging market economies, which have much of their growth ahead of them, either run or should run persistent current account deficits in order to smooth consumption intertemporally. The counterpart of these deficits is their dependence on capital inflows, which can suddenly stop. We make two...

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...