Consider an emerging market economy facing a capital inflow surge.
a) Identify three possible positive and three possible negative effects of capital inflows
b) What policy instruments are potentially available to deal with these negative effects?
c) Explain which instrument you would use to address each of these three negative effects.
d) For each instrument-effect, explain whether the use of the instrument ameliorates or exacerbates the other two negative effects you have identified.
e) If only one instrument were available, which would you choose, and why?