Inflows
in sentence
636 examples of Inflows in a sentence
Emerging-market central-bank governors fear a US that alternates between expansionary policy that fuels huge hot-money
inflows
and a domestic inflationary spiral, and rapid tightening that chokes off credit and causes a domestic recession.
The “Volcker shock” created a triple whammy: the US entered a deep recession; commodity prices plummeted; and Latin America’s capital
inflows
abruptly reversed, shifting toward US dollar-denominated instruments that offered better yields.
Foreign capital flooded in again, and the new consensus view was that bond-driven capital
inflows
would impose market discipline on Latin America’s historically profligate governments, because, presumably, only credit-worthy agents would be able to borrow.
This was possible only because of the boom in commodity prices that began in 2003, and the surge in capital
inflows
until 2012, as developed-country investors searched for yield in the wake of the 2008 global financial crisis.
Such
inflows
are driven in part by short-term cyclical factors (interest-rate differentials and a wall of liquidity chasing higher-yielding assets as zero policy rates and more quantitative easing reduce opportunities in the sluggish advanced economies).
Given all this, the most critical policy question in emerging markets today is how to respond to
inflows
that will inevitably drive up their exchange rates and threaten export-led growth.
This may be the right response if the
inflows
and upward pressure on the exchange rate are driven by fundamental factors (a current-account surplus, an undervalued currency, a large and persistent growth differential).
But, in many cases,
inflows
are driven by short-term factors, fads, and irrational exuberance, which can lead to an overvalued currency, the crowding out of non-traditional export sectors or import-competing sectors, a loss of competitiveness, and eventually a large current-account deficit and thus tighter external constraints on growth.
This prevents monetary and credit growth, but, by keeping interest-rate differentials high, sterilized intervention feeds carry-trade inflows, thus contributing to the problem that it was supposed to solve.
The fourth option is to impose capital controls on
inflows
(or liberalize controls on outflows).
Leaving aside the issue of whether or not such controls are “leaky,” evidence suggests that controls on
inflows
of short-term “hot money” do not affect the overall amount of capital
inflows.
The fifth option is to tighten fiscal policy and reduce budget deficits with the aim of lowering the high interest rates that drive the
inflows.
But sounder fiscal policy might lead to even higher
inflows
as the country’s external balance and sovereign-risk outlook improve.
The final option is massive, large-scale, and permanent sterilized intervention – or, equivalently, the use of sovereign wealth funds or other fiscal-stabilization mechanisms – to accumulate the foreign assets needed to compensate for the effects on the currency’s value brought about by long-term
inflows.
The argument for this option is that long-term secular factors are important drivers of capital inflows, as advanced-economy investors discover that they are underweight in emerging-market assets and reduce their portfolios’ “home bias.”
Sterilized intervention usually doesn’t work: if assets in advanced economies and emerging markets remain perfectly substitutable,
inflows
will continue as long as interest-rate differentials persist.
This means that at some point large-scale, persistent sterilized foreign-exchange intervention – amounting to several percentage points of GDP – would satisfy the additional demand for emerging-market assets and stop the inflows, even if interest-rate differentials remain.
But when a currency’s appreciation is triggered by capital
inflows
that represent the asset-diversification preferences of advanced-economy investors, it can and should be resisted.
While climbing the world’s highest mountain will always be dangerous, we must remember that on this occasion only Sherpas died, and in the years since Everest began attracting large
inflows
of Western climbers, Sherpas have accounted for most fatalities.
The unprecedented increase in developing countries’ foreign exchange reserves is due both to their current-account surpluses and large net capital
inflows.
Reflecting flawed economic arguments, India embraced autarky in trade and rejected
inflows
of equity investment.
Moreover, SADC has faced a sharp decline in FDI inflows, which fell from $9.8 billion in 2001 to $3 billion in 2003.
But, despite these efforts, FDI
inflows
in the region (excluding South Africa) remain too low to have a significant economic impact.
That, coupled with the 3% depreciation in the past few months, should send a strong signal to speculators that one-way renminbi bets are hazardous – a signal that could help dampen
inflows
of hot money, which have complicated liquidity management and fueled asset-market volatility in China.
Long-term development aid – which, globally, amounts to eight times the amount allocated to humanitarian interventions – must be available to countries confronting large refugee inflows, including middle-income countries like Lebanon and Jordan that are normally not considered eligible.
Meanwhile, another favorite culprit, refugee inflows, has a compelling alibi: there are actually very few asylum-seekers in the countries spearheading attacks on the EU’s migration policies.
The problem is not just that they need to wean themselves from their reliance on fickle capital
inflows
and commodity booms, which have often left them vulnerable to shocks and prone to crises.
The Ghani-O’Connell evidence includes data starting in the early 1990s, during which developing countries were experiencing economy-wide convergence, boosted by capital
inflows
and commodity windfalls.
Yet, as highlighted at the recent conference “Mining Dialogue 360 Degrees,” youth unemployment has reached unprecedented levels, and real inward investment for mining is close to zero – while
inflows
in neighboring Zimbabwe are rising steadily.
Despite massive government efforts in Europe and the developed world to restrain immigration after the oil price shocks of the 1970s, labor
inflows
into the rich countries started to increase in the 1980s to an annual average of about 1.4 million in Europe and 2.3 million in the US.
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