Capital Flows to Asia Revisited: Monetary Policy Options


By Anoop Singh

Capital flows into emerging Asia should be high on the ‘watch list’ for policymakers in the region. But, perhaps, not in the way we had previously anticipated.

Twelve months ago our policy antennae were keenly attuned to the risks posed by the foreign capital that flooded into Asia from mid-2009 onwards. What was remarkable about this was the speed of the rebound after the massive drop during the global financial crisis. Within just 5 quarters, net inflows rose from their early 2009 trough to their mid-2010 peak—a mere one-fifth of the time that typically elapsed between troughs and peaks in the cycle of capital flows during the pre-Asian crisis period.

Another twelve months on, what we’re seeing is not really all that “exceptional”—a point often overlooked in the current debate on capital inflows to emerging markets. Continue reading

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