Taming Volatile Capital Flows in Emerging Economies

Just about all economists agree that international trade in goods and services is beneficial and should be unrestricted. There is much less unanimity, however, on the benefits of international capital flows. The volatility and 'sudden stops' experienced over recent decades, especially in emerging economies, have provoked some rethinking. It is argued here that this re-think has much further to go before the analytical discussion fits the reality of capital-flow behaviour and policy comes to grips with the challenge of living with capricious capital flows. Flows to East Asian emerging economies illustrate the argument.