Edited by Erdem Başçı, Sübidey Togan and Jürgen von Hagen
258 Macroeconomic policies for EU accession COMMENTS Fatma Taskın ¸ Eichengreen and Choudhry address the important issue of how to manage large capital ﬂows to avoid crisis in emerging economies. The chapter focuses on two groups of emerging economies, namely Central and East European (CEE) and East Asian countries, and reviews the risk of large inﬂows of capital and appreciation of exchange rates for these countries. After evaluating alternative strategies for the management of the inﬂows and the exchange rate regimes the authors arrive at the conclusion that ﬁscal management is the most eﬀective strategy. Eichengreen and Choudhry state that CEE and East Asian countries are similar in many aspects, such as large private inﬂows of capital and stable exchange rate policies with their trading partners. However, they diﬀer signiﬁcantly in their savings and investment balance and the repercussions of this imbalance for the equilibrium in the rest of the economy. The challenge in devising policies for the management of large capital inﬂows originates from these diﬀerences. They stress that the East Asian countries, with more growth to catch up and favourable demographic conditions have higher saving rates. With better ﬁscal discipline, which exerts less of a burden on the private savings and prudent selection of investments, following the ﬁnancial crisis of 1997–98 the countries have a surplus in their domestic investment–savings balance. The surplus in the savings– investment balance in these countries translates to current account surplus and reserve...
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