Jasna Tonovska – Faculty of Economics – Skopje, Ss. Cyril and Methodius University in Skopje, Republic of North Macedonia

Predrag Trpeski – Faculty of Economics – Skopje, Ss. Cyril and Methodius University in Skopje, Republic of North Macedonia 

DOI: https://doi.org/10.31410/EMAN.S.P.2022.13

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6th International Scientific Conference – EMAN 2022 – Economics and Management: How to Cope With Disrupted Times, Ljubljana, Slovenia, March 24, 2022, SELECTED PAPERS, published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia; ISBN 978-86-80194-58-5, ISSN 2683-4510



Volatile capital flows pose serious risks to economic growth and financial stability. This paper investigates the link between economic per­formance and gross capital flows volatility in emerging market and devel­oping economies (EMDE), and specifically, the extent to which macropru­dential policy measures can diminish the detrimental effects of capital flows volatility on growth. For that purpose, we start by constructing volatility es­timates for gross capital flows and their subcomponents on a sample of 37 EMDEs, following the methodology by Wang (2019). Then we perform pan­el regression over the period 2000-2018 incorporating the main variables of interest: economic growth, gross capital inflows volatility and macropru­dential policy. The results show that the negative effect of gross capital in­flows volatility on growth is significantly mitigated by the implementation of macroprudential policy measures. The results are robust against reverse causality and omitted variables bias.


Capital flows volatility; Macroprudential policy measures; Economic growth


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