The Tosovsky Dilemma: Capital Surges in Transition Countries

Finance & Development, Vol. 39, No. 3

Posted: 18 Jun 2009 Last revised: 23 Aug 2009

See all articles by Leslie Lipschitz

Leslie Lipschitz

IMF Institute

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department

Alexandros Mourmouras

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: June 17, 2009

Abstract

Transition countries that open themselves up to global capital markets are like honest citizens in a dangerous world - they are vulnerable to large and potentially erratic flows. Such flows should not be seen as one-off destabilizing events: they are intrinsic to the transition process and therefore need to be factored into policy formulation. This paper deals in a nontechnical way with some of the difficulties - fundamental incentives for massive carry trade and the vulnerability to shifting risk premia - that dog the formulation and implementation of macroeconomic stabilization policies in rapidly-developing emerging market economies.

Keywords: Transition countries, global capital markets

JEL Classification: P20, F21

Suggested Citation

Lipschitz, Leslie and Lane, Timothy and Mourmouras, Alexandros, The Tosovsky Dilemma: Capital Surges in Transition Countries (June 17, 2009). Finance & Development, Vol. 39, No. 3, Available at SSRN: https://ssrn.com/abstract=1421440

Leslie Lipschitz (Contact Author)

IMF Institute ( email )

700 19th St. NW
Washington, DC 20431
United States
202-623-8866 (Phone)

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States
202-623-7648 (Phone)
202-623-4405 (Fax)

Alexandros Mourmouras

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Room 5-311
Washington, DC 20431
United States
202-623-5402 (Phone)
202-589-5402 (Fax)

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