By Cathérine Casanova, Beatrice Scheubel and Livio Stracca
Since the Global Crisis, the channels of capital flows have changed significantly. This column analyses key trends and underlying drivers of capital flows since the Global Crisis, including the policy trade-offs. It documents the increasing importance of market-based funding, a growing reliance on domestic currency liabilities, and a less stable foreign direct investment environment, particularly for emerging market economies. Although these changes create risks which should be managed, capital flows also present clear benefits for stimulating economic performance and efficiency.