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Working Paper 252 - Capital flow surges and economic growth in sub-Saharan Africa: Any role for capital controls?


International capital flows not only offer a great deal of benefits to financially integrated countries, they also pose numerous macroeconomic challenges (Reinhart and Reinhart, 2008; Furceri, Guichard and Rusticelli, 2011). While countries with some degrees of financial openness are able to share income risks with rest of the world, smooth their consumption path and bridge saving-investment and foreign exchange gaps (Prasad et al., 2003; Chenery and Strout, 1966; Taylor, 1991; Akinboade, Siebrits and Roussot, 2006), they also face the risks of having their economies exposed to exogenous shocks transmitted through capital flow volatility which, in turn, induce domestic instability (Kaminsky, 2005; Fernandez et al., 2015) and weaken economic growth (Cavallo, 2005).

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