Anwar Nasution, University of Indonesia: I enjoyed reading this paper, which discusses major determinants of capital inflows in 47 advanced economies and emerging markets. The paper, however, only discusses the benefit of capital inflows to help promote economic growth of the recipient countries as it helps finance the domestic investment saving gap and the balance of payment deficits. The open capital account is also beneficial to the donor economy as it allows investors to diversify their asset portfolios and debtors more alternative sources of borrowing.
On the other hand, Hoggarth Jung and Reinhardt (2016) state tha debt inflows from foreign banks, particularly in foreign currency, are more prone to booms and bust. These flows are also more sensitive to external factors, especially in global risk and changes in domestic credit growth. Many studies indicate that injection to domestic income streams could cause problems like Dutch disease, appreciation of...