Capital flows and their implications for monetary and financial stability: the experience of Poland

The last two decades can be characterised as a period of globalisation which has involved economic liberalisation combined with the opening-up of economies to international trade and financial flows. Economic liberalisation implied the lifting of various controls and restrictions and of entry barriers into specific sectors like banking, as well as the pursuit of market-oriented reforms, with far-reaching privatisation. Many countries competed for international capital, reforming their economies to attract foreign investment (see Abiad and Mody (2005)). As a result in many countries, including Poland, the opening-up of the economy has triggered massive capital flows. The main topics of the present paper are policy implications and the effects of these capital movements.