Board of Governors of the Federal Reserve System International Finance Discussion Papers Number 717 January 2002 DETERMINANTS AND REPERCUSSIONS OF THE COMPOSITION OF CAPITAL INFLOWS

The Mexican, Asian, and Russian crises of the midand late 1990s, have renewed the interest among policymakers in the determinants and effects of private capital flows. This paper analyzes whether policies can affect the composition of capital inflows and whether different compositions aggravate crises. We find that, while fundamentals matter, capital controls can affect the mix of capital inflows that countries receive. We find that during the Asian crisis countries with more Yen denominated debt faired worse, while during the Mexican crisis larger short-term debt stocks increased the severity of the crisis.