The paper by Calvo, Leiderman, and Reinhart examines the surge in capital inflows to developing countries in the 1990s, focusing on Asia and Latin America. The authors attribute the inflows to both domestic factors, such as sound policies and economic performance, and global factors, including declining short-term interest rates in the United States and improved creditworthiness of debtor countries. The surge in inflows has led to rapid monetary expansion, inflationary pressures, real exchange rate appreciation, and widening current account deficits, posing significant policy challenges. The paper discusses the determinants of capital flows, the macroeconomic effects, and policy responses, including exchange rate policy, sterilization, and fiscal measures. It highlights the limited options for policy intervention and the potential costs associated with various strategies. The authors conclude by emphasizing the need for better understanding of the forces driving capital flows and the importance of policy management to reduce vulnerability to potential reversals.The paper by Calvo, Leiderman, and Reinhart examines the surge in capital inflows to developing countries in the 1990s, focusing on Asia and Latin America. The authors attribute the inflows to both domestic factors, such as sound policies and economic performance, and global factors, including declining short-term interest rates in the United States and improved creditworthiness of debtor countries. The surge in inflows has led to rapid monetary expansion, inflationary pressures, real exchange rate appreciation, and widening current account deficits, posing significant policy challenges. The paper discusses the determinants of capital flows, the macroeconomic effects, and policy responses, including exchange rate policy, sterilization, and fiscal measures. It highlights the limited options for policy intervention and the potential costs associated with various strategies. The authors conclude by emphasizing the need for better understanding of the forces driving capital flows and the importance of policy management to reduce vulnerability to potential reversals.