Debt-Creating Capital Flows and their Macroeconomic Implications in Ukraine

This paper investigates the macroeconomic and financial stability risks associated with foreign borrowing by corporations and banks in emerging markets; it estimates the effects of debt-creating flows for the Ukrainian economy by applying a multiple-regression analysis; and assesses the foreign debt position from the point of view of a ‘safe’ debt level. On the basis of estimates and conclusions thereby derived, the author proposes a spectrum of capital flow management measures that may smoothen the swings in capital flows and reduce the build-up of associated vulnerabilities.