A financial crisis brought on by volatile capital flows

Question

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Financial crises brought on by volatile capital flows are often preceded by a period of capital inflows and an increase in foreign liabilities. This can make a country vulnerable to sudden shifts in market sentiment and capital outflows. Strong international positions may help countries weather crises better, but they do not guarantee immunity from them. High budget deficits, while a concern, are not the sole cause of financial crises brought on by volatile capital flows.

A Financial Crisis Brought on by Volatile Capital Flows