Aggregated capital flows have a positive impact on the real effective exchange rate in all regions except central and eastern European countries, says a paper published by the IMF in July.

Attracting capital and foreign exchange flows is crucial for developing countries. However, these flows could lead to real exchange rate appreciation and may thus have detrimental effects on competitiveness, jeopardising exports and growth, the paper says.

The authors Damyana Bakardzhieva, Sami Ben Naceur, and