Working Papers

(WP2/2022) Taming the “Capital Flows-Credit Nexus”: A Sectoral Approach

Publish Date: : August 2022
Authors:: Daniel Carvalho, Etienne Lepers, Rogelio Mercado, Jr.


Using novel datasets on both sectoral flows and policy measures, this paper underscores the importance of a granular sectoral approach in identifying the full range of connections between capital flows and credit growth, as well as the appropriate policy response. While, in general, macroprudential and foreign currency-based measures are better suited to mitigate the impact of banking sector flows, capital controls appear to lessen the impact of inflows to non-financial corporates and other financial corporates.