Annual gross cross-border capital flows increased considerably from about 5% of world GDP in the mid-1990s to about 20% in 2007. The global financial crisis in 2008 has vividly demonstrated the complexity and rapidity of the international transmission of financial shocks and vulnerabilities associated with increased international capital flows, particularly in emerging markets and developing countries. Furthermore, the increase in international capital flows, despite a temporary contraction during the global crisis, has motivated policy discussions on the associated benefits and costs of capital mobility.
Fiscal policies can play an important role in reducing vulnerabilities associated with capital inflows. Countries that typically follow counter-cyclical fiscal restraint policy have experienced more moderate credit booms during large inflow episodes, and especially during debt inflow episodes. These are, however, general findings and related policy recommendations have to take into account countries’ individual situations and constraints.
In this regard, the aims of the special issue are to apply computational techniques that investigate on the one hand, for capital inflow recipient countries, how the fiscal policies can prevent or reduce the adverse effects of international capital flow dynamics and stabilise the domestic economy; on the other hand, for capital outflow countries, how fiscal policies influence domestic economy via key macroeconomic indicators, maintain external balance and revive domestic investment in the sustainable path.
Articles in this issue can range from very applied, policy-oriented applications of computational methods to highly theoretical and mathematically complex analyses of algorithms and numerical methods. The proposed analytical instruments must be empirically validated on the basis of replicable data, and should take into account the interdependence of economic trends over time, countries and sectors.
Suitable topics include but are not limited to:
- International trade, balance of payment, global trade imbalance
- Capital flows, foreign direct investment, private and public portfolio flows
- Fiscal policy
- National debt
- Foreign aid
- Sovereign wealth funds
Submission of manuscripts: 30 June, 2013 (extended)