Shocks Matter Managing Capital Flows With Multiple Instruments In Emerging Economies

Author : Mr.Ruy Lama
Publisher : International Monetary Fund
ISBN 13 : 151354568X
Total Pages : 44 pages
Book Rating : 4.84/5 ( download)

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Download or read book Shocks Matter: Managing Capital Flows with Multiple Instruments in Emerging Economies written by Mr.Ruy Lama and published by International Monetary Fund. This book was released on 2020-06-19 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the optimal management of capital flows in a small open economy model with financial frictions and multiple policy instruments. The paper reports two main findings. First, both foreign exchange intervention (FXI) and macroprudential polices are tools complementary to the monetary policy rate that can largely reduce inflation and output volatility in a scenario of capital outflows. Second, the optimal policy mix depends on the underlying shock driving capital flows. FXI takes the leading role in response to foreign interest rate shocks, while macroprudential policy becomes the prominent tool for domestic risk shocks. These results highlight the importance of calibrating the use of multiple instruments according to the underlying shocks that induce shifts in capital flows.

Author : Rui Mano
Publisher : International Monetary Fund
ISBN 13 : 1513521500
Total Pages : 44 pages
Book Rating : 4.03/5 ( download)

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Download or read book One Shock, Many Policy Responses written by Rui Mano and published by International Monetary Fund. This book was released on 2020-01-17 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Policymakers have relied on a wide range of policy tools to cope with capital flow shocks. And yet, the effects and interaction of these policies remain under debate, as does the motivation for using them. In this paper, quantile local projections are used to estimate the entire distribution of future policy responses to portfolio flow shocks for 20 emerging markets and understand the variety of policy choices across the sample. To assuage endogeneity concerns, estimates rely on the fact that global capital flows are exogenous from the viewpoint of any one of these countries. The paper finds that: (i) policy responses to capital flow shocks are heterogeneous across countries, fat-tailed—“extreme” responses tend to be more elastic than “typical” responses—and asymmetric—“extreme” responses tend to be more elastic with respect to outflows than to inflows; (ii) country characteristics are linked to policy choices—with cross-country differences in forex intervention relating to the size of balance sheet vulnerabilities and the depth of the forex market; (iii) the use of targeted macroprudential policy and capital flows management measures can help “free the hands” of monetary policy by allowing it to focus more squarely on domestic cyclical developments.

Author : GASTON. SAHAY GELOS (RATNA.)
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 2040 pages
Book Rating : 4.63/5 ( download)

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Download or read book SHOCKS AND CAPITAL FLOWS written by GASTON. SAHAY GELOS (RATNA.) and published by International Monetary Fund. This book was released on 2023 with total page 2040 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Author : Mr.Harald Finger
Publisher : International Monetary Fund
ISBN 13 : 1513516841
Total Pages : 76 pages
Book Rating : 4.44/5 ( download)

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Download or read book Facing the Tides written by Mr.Harald Finger and published by International Monetary Fund. This book was released on 2019-10-14 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper looks empirically at some economic effects of volatile exchange rates and financial conditions and examines policy responses for managing such volatility. It also sheds light on some economic costs that stem from volatile capital flows and exchange rates and analyzes how countries deploy their policy toolkits in response. The data-driven analysis should contribute to ongoing reflections about how to manage volatile capital flows and exchange rates both in Asian EMEs and more broadly.

Author : Ms. Mitali Das
Publisher : International Monetary Fund
ISBN 13 : 1616358343
Total Pages : 54 pages
Book Rating : 4.41/5 ( download)

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Download or read book Preemptive Policies and Risk-Off Shocks in Emerging Markets written by Ms. Mitali Das and published by International Monetary Fund. This book was released on 2022-01-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that “preemptive” capital flow management measures (CFM) can reduce emerging markets and developing countries’ (EMDE) external finance premia during risk-off shocks, especially for vulnerable countries. Using a panel dataset of 56 EMDEs during 1996–2020 at monthly frequency, we document that countries with preemptive policies in place during the five year window before risk-off shocks experienced relatively lower external finance premia and exchange rate volatility during the shock compared to countries which did not have such preemptive policies in place. We use the episodes of Taper Tantrum and COVID-19 as risk-off shocks. Our identification relies on a difference-in-differences methodology with country fixed effects where preemptive policies are ex-ante by construction and cannot be put in place as a response to the shock ex-post. We control the effects of other policies, such as monetary policy, foreign exchange interventions (FXI), easing of inflow CFMs and tightening of outflow CFMs that are used in response to the risk-off shocks. By reducing the impact of risk-off shocks on countries’ funding costs and exchange rate volatility, preemptive policies enable countries’ continued access to international capital markets during troubled times.

Author : Masahiro Kawai
Publisher : Edward Elgar Publishing
ISBN 13 : 184980687X
Total Pages : 465 pages
Book Rating : 4.79/5 ( download)

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Download or read book Managing Capital Flows written by Masahiro Kawai and published by Edward Elgar Publishing. This book was released on 2010-01-01 with total page 465 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managing Capital Flows provides analyses that can help policymakers develop a framework for managing capital flows that is consistent with prudent macroeconomic and financial sector stability. While capital inflows can provide emerging market economies with invaluable benefits in pursuing economic development and growth, they can also pose serious policy challenges for macroeconomic management and financial sector supervision. The expert contributors cover a wide range of issues related to managing capital flows and analyze the experience of emerging Asian economies in dealing with surges in capital inflows. They also discuss possible policy measures to manage capital flows while remaining consistent with the goals of macroeconomic and financial sector stability. Building on this analysis, the book presents options for workable national policies and regional policy cooperation, particularly in exchange rate management. Containing chapters that bring in international experiences relevant to Asia and other emerging market economies, this insightful book will appeal to policymakers in governments and financial institutions, as well as public and private finance experts. It will also be of great interest to advanced students and academic researchers in finance.

Author : Mr.R. G Gelos
Publisher : International Monetary Fund
ISBN 13 : 1513524798
Total Pages : 44 pages
Book Rating : 4.95/5 ( download)

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Download or read book Capital Flows at Risk: Taming the Ebbs and Flows written by Mr.R. G Gelos and published by International Monetary Fund. This book was released on 2019-12-20 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new framework to answer critical policy questions: What policies and policy frameworks are most effective in dampening sharp capital flow movements in response to global shocks? What are the near- versus medium-term trade-offs of different policies? We tackle these questions using a quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on current domestic structural characteristics, policies, and global financial conditions. This new approach allows policymakers to quantify capital flows risks and evaluate policy tools to mitigate them, thus building the foundation of a risk management framework for capital flows.

Author : Maria Sole Pagliari
Publisher : International Monetary Fund
ISBN 13 : 147558525X
Total Pages : 58 pages
Book Rating : 4.54/5 ( download)

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Download or read book The Volatility of Capital Flows in Emerging Markets written by Maria Sole Pagliari and published by International Monetary Fund. This book was released on 2017-03-07 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Capital flow volatility is a concern for macroeconomic and financial stability. Nonetheless, literature is scarce in this topic. Our paper sheds light on this issue in two dimensions. First, using quarterly data for 65 countries over the period 1970Q1-2016Q1, we construct three measures of volatility, for total capital flows and key instruments. Second, we perform panel regressions to understand the determinants of volatility. The measures show that the volatility of all instruments is prone to bouts, rising sharply during global shocks like the taper tantrum episode. Capital flow volatility thus remains a challenge for policy makers. The regression results suggest that push factors can be more important than pull factors in explaining volatility, illustrating that the characteristics of volatility can be different from those of the flows levels.

Author : International Monetary Fund
Publisher : INTERNATIONAL MONETARY FUND
ISBN 13 : 9781513558769
Total Pages : 54 pages
Book Rating : 4.65/5 ( download)

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Download or read book Toward an Integrated Policy Framework written by International Monetary Fund and published by INTERNATIONAL MONETARY FUND. This book was released on 2020-10-08 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Policymakers often face difficult tradeoffs in pursuing domestic and external stabilization objectives. The paper reflects staff’s work to advance the understanding of the policy options and tradeoffs available to policymakers in a systematic and analytical way. The paper recognizes that the optimal path of the IPF tools depends on structural characteristics and fiscal policies. The operational implications of IPF findings require careful consideration. Developing safeguards to minimize the risk of inappropriate use of IPF policies will be essential. Staff remains guided by the Fund’s Institutional View (IV) on the Liberalization and Management of Capital Flows.

Author : International Monetary Fund
Publisher : International Monetary Fund
ISBN 13 : 1498342620
Total Pages : 45 pages
Book Rating : 4.29/5 ( download)

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Download or read book Staff Guidance Note on Macroprudential Policy written by International Monetary Fund and published by International Monetary Fund. This book was released on 2014-06-11 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries