Baltic and Icelandic Experiences of Capital Flows and Capital Flow Measures

Abstract

The aim of this empirical study is to describe and provide analysis on the experience of managing capital flows in Iceland and the Baltic countries. During the build-up of the crisis, there were shortcomings in macroeconomic policies and in the policy mix, as well as in financial supervision in the countries covered. While the use of traditional macroeconomic and structural policies was far from exhausted, recognizing that there are no substitutes for sound macroeconomic policies, with an IMF framework on capital flows in place prior to the crisis, it might have been easier for the IMF and national policymakers to identify accelerating problems at an early stage and address them with targeted measures.

Keywords: Capital flows, Iceland, Estonia, Latvia, Lithuania, Baltics, Financial sector, Capital controls, Banks, Bank supervision, Capital Flow Measures, Baltic Countries, capital inflows, capital outflows, management of capital flows, capital adequacy, subsidiaries, credit expansion, net capital flows, capital transactions, foreign capital, capital adequacy ratio, capital accounts, foreign capital inflow, international capital flows, free capital flows, capital markets, capital gains, capital mobility, short-term capital, capital account transactions, capital requirement, indexation, liberalization of capital, domestic capital markets, border capital flows, crisis prevention, capital account restric

JEL Classification: E50, F30, F60