Triple Crisis bloggers Stephany Griffith-Jones and Kevin P. Gallagher published the following proposal to stem the excessive flows of speculative capital into developing countries in Economic and Political Weekly. In their approach, the United States and developing countries each regulate the outflow and inflow of hot money and redirect investment toward the real economy.
Curbing Hot Capital Flows to Protect the Real Economy
Developing countries are once again the destination for speculative capital flows with in inlows reaching pre-crisis levels, leading to currency appreciation and asset bubbles. Many of these nations are deploying prudential capital regulations to stem these flows. However, this may only be a partial remedy to the problem – such measures should be coupled with action by the developed countries in order to fully steer capital to productive use and to avoid future crises.