Let me sketch this out briefly to give you a flavor of the challenge that EMEs confront in managing their capital accounts. 25. The years before the crisis – the period of the Great Moderation – saw EMEs receiving large capital inflows, much more than they needed. This was driven by both push and pull factors.
Thus, it is not easy to judge where the Japanese economy is headed and to draw up a prescription for each problem. In such a situation, it is important that the circumstances be analyzed carefully so as to perceive the underlying mechanism.