Capital flows drive financial imbalances: IMF study
Capital inflows were the driving force behind the growth of financial imbalances in the lead-up to the crisis, research published Monday by the IMF finds.
The paper, by Ouarda Merrouche and Erlend Nier, examines the roles of three factors in financial imbalances: capital inflows; monetary policy; and weak supervision and regulation. Of the three, capital inflows were most clearly the root cause, the authors argue, adding that inadequate oversight exacerbated the problem. "[By] contrast, monetary
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