Capital flows during the pandemic: lessons for a more resilient international financial architecture

48 Pages Posted: 23 Dec 2020

Date Written: December 21, 2020

Abstract

This paper explores how the sudden stop in capital flows to emerging market economies associated with the Covid-19 pandemic unfolded, the substantial policy responses that were needed to alleviate it, and the lessons we might draw from this episode. We identify four areas where further work could be undertaken to enhance the policy response to capital flow pressures in the future: (i) addressing data gaps — particularly gaps in the composition of portfolio flows, in flows to low income countries, and on the timeliness of macroprudential and capital flow management policy responses; (ii) improving the resilience of non-bank financial intermediation as a source of financing for emerging market economies; (iii) understanding the effectiveness of different policy mix responses; and (iv) ensuring the global financial safety net is sufficiently resilient to cope with future severe and sustained capital flow shocks.

Suggested Citation

Eguren Martin, Fernando and Joy, Mark and Maurini, Claudia and Moro, Alessandro and Nispi Landi, Valerio and Schiavone, Alessandro and van Hombeeck, Carlos Eduardo, Capital flows during the pandemic: lessons for a more resilient international financial architecture (December 21, 2020). Bank of England Financial Stability Paper No. 45, Available at SSRN: https://ssrn.com/abstract=3753422 or http://dx.doi.org/10.2139/ssrn.3753422

Fernando Eguren Martin

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Mark Joy (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Claudia Maurini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Moro

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Valerio Nispi Landi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Schiavone

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Carlos Eduardo Van Hombeeck

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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