One of the most striking features of the world economy over the last twenty-five years has been the sharp decline in the real interest rate from approximately 4% in the early 1990s to -1.5% in 2013 (figure 1). During this period there have been two waves of large capital inflows into emerging economies ...

How are capital flows affected by financial reforms that relax credit constraints and raise the ability of domestic firms to borrow? At first glimpse one might be tempted to dismiss the question as trivial. If some domestic firms are credit constrained (which we assume to be the case!) relaxing their ...

Global liquidity has become a popular concept in academic and policy discussions of recent years. This concept captures overall 'ease of financing' prevalent in the world economy (Caruana 2013) and it is usually mentioned as a possible cause of capital inflows global imbalances excessive credit expansion ...