The longest cycle of synchronous, massive capital inflows lasted from 1975 to 1982 and was followed by the debt crisis. The heavy capital inflows resurfaced during the 1990–1993 period and were followed by debt restructuring in the emerging economies. Starting in 2002, a large number of countries were faced with massive capital inflows. The end of the capital flow bonanza overlapped the onset of the financial turmoil in July 2007. In Romania, this episode became more manifest in 2004 and came to an end in 2008. Next, I will elaborate on the causes generating synchronous, massive capital inflows in a relatively great number of countries and the key developments emerging when the countries are faced with heavy capital inflows. In so doing, I will show the stylised facts, as they can be elicited from literature (Calvo et al., 1993). Then I will describe the case of Romania and the major challenges to economic policies. Finally, I will resort to the results described in the literature to present in a stylised manner the implications on some macroeconomic variables in the event of a capital account worsening. I will draw on these results to show that the provisions under the arrangement signed with the EU and the IMF are in line with the results described in the literature. 1. Causes and effects of massive capital inflows  In recent years, one of the causes of massive capital inflows in emerging economies was excess liquidity.
The region’s 45 countries in the MSCI AC World Index account for less than 10 per cent of the Index although their share of world GDP is 19 per cent. 21. We need to make emerging Asia’s capital markets deep enough to effectively intermediate its considerable savings pool and broad enough to provide a range of suitable instruments for risk mitigation. 22. The crying investment need in Asia is for infrastructure. A report released by the Asian Development Bank Institute estimates that the total investment needs for national infrastructure development in Asia will average close to $ billion per year from 2010 to 2020. But private participation in infrastructure investments in Asia amounted to just $ billion in 2009, less than half the $ billion that went into real estate investment. It will be a shame if Asia’s considerable savings pool, not to mention the inflows of capital from abroad, goes into speculative real estate instead of productive infrastructure investments that enhance long-term economic growth. Having well-developed capital markets is a good way of ensuring that capital is allocated to productive uses. 23. A promising experiment in developing better mechanisms for allocating capital is the World Bank-Singapore Urban Hub. Established in 2009, it brings together Singapore’s public agencies, research institutes, and private sector players to share their experiences with developing countries, in areas ranging from water and waste management, land use planning, and urban development.