External Dimension of an Emerging Economy, India

4    Macroeconomic policy within cycles of international capital flows

The Indian experience

Sukanya Bose

Cycles in international capital flows

Emerging market economies have witnessed sharp swings in capital flows in recent years. From a high of nearly $1.3 trillion in 2007, net private capital flows to these countries dropped to roughly $600 billion in 2008. The recovery thereafter has been short-lived, with another downturn marked by financial turmoil, debt deleveraging and economic slowdown in the eurozone. Taking a slightly longer view, international capital flows to emerging-market economies (EMEs) seem to have entered their fourth major cycle in the past fifteen years (1996–2011), with the attendant features of boom, bust and then recovery. ...