On Capital Inflows and Outflows: Gross and Net Flows and Economic Policy

Capital flows are significant because of their impact on financial stability, macroeconomic fluctuations, and exchange rates. There are several dimensions to the discussion of capital flows, one of the most important being the distinction between gross and net capital inflows—a distinction that has implications for macroeconomic management and financial stability. Therefore, in this article, in order to delve deeper into the analysis of the transmission mechanisms of capital inflows, these concepts are analyzed and discussed, taking into account the distortions and underlying effects that arise from the use of different policy instruments.