​Over the last few years, the debate on private capital flows and their management has regained momentum. This paper surveys the literature on the following private capital flows-related issues, with a focus on low-income countries: (i) impact on growth; (ii) risks; (iii) capital account management tools; and (iv) effectiveness of different policy measures. Overall, the analysis confirms conventional wisdom according to which private capital flows (i.e.  foreign direct investment, portfolio investment, cross-border bank lending), in some cases and under certain conditions, may carry important opportunities, but they are also a significant source of risks. Therefore, it is important to develop adequate and effective capital account management policy tools.

Isabella Massa