* * * Ladies and gentlemen Ever since the ground-breaking work of Solow in the fifties most policy makers and members of academia – especially in the advanced economies – have inclined to favour free capital flows.
Many crises later, the view has somewhat shifted, in particular, regarding emerging markets and developing countries, which is the group of countries that I will focus my remarks on. Not only can capital flow reversals and in the extreme form sudden stops create significant costs in terms of output losses, financial instability and even political instability.