Dealing with Large and Volatile Capital Flows and the Role of the IMF
60 Pages Posted: 3 Feb 2017
Date Written: September 30, 2016
The last decade has been characterised by the pronounced volatility of capital flows. While cross-border capital flows can have many benefits for both advanced and emerging market economies, they may also carry risks, which require appropriate policy responses. Disentangling the push from the pull factors driving capital flows is key to designing appropriate policies to deal with them. Strong institutions, sound fundamentals and a large domestic investor base tend to shield economies from adverse global conditions and attract less volatile types of capital. However, when the policy space for using traditional macroeconomic policies is limited, countries may also turn to macro-prudential and capital flow management policies in a pragmatic manner. The IMF can play an important role in helping countries to deal with capital flows, through its surveillance and lending policy and through international cooperation.
Keywords: capital flows, capital flow management, international cooperation, IMF
JEL Classification: F3, F32, F38, F42, F65, G28
Suggested Citation: Suggested Citation