Gross flows can create risk even with small net flows, Gita Gopinath notes

Gross flows can create risk even with small net flows, Gita Gopinath notes
Large imbalances and financial risk

Gita Gopinath addressed comments from Olivier Blanchard regarding financial imbalances and associated risks. She clarified that large imbalances are not a prerequisite for financial risk, emphasizing that the report explicitly acknowledges gross flows can themselves introduce financial vulnerabilities even when net flows remain small.

Gopinath pointed to a specific section of the report dedicated to this topic, underlining the importance of understanding how different types of capital flows can impact financial stability.

Earlier this year, Gopinath presented a report on global and sectoral imbalances to French President Emmanuel Macron at the G7. The report explored causes and solutions related to imbalances in the international financial system. Gopinath has previously praised policymakers’ experience, as noted when she recognized Hyun Song Shin’s knowledge and policy expertise as key qualities for central banking.

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