The new IMF approach to capital account management and its blind spots: lessons from Brazil and South Korea
120 citations recorded by the source corpus.
As emerging economies experience a boom in capital inflows, governments are increasingly concerned about their downsides. Even the IMF (International Monetary Fund), long a stalwart proponent of financial liberalization, has engaged in a new debate on capital flow management. Drawing lessons from empirical case studies on Brazil and South Korea, this paper finds that the new IMF framework remains insufficient in two main aspects. First, by defining ‘capital flow management measures’ (CFMs) as a temporary instrument embedded in an overall strategy of financial opening, the organization insists on the general advantages of financial liberalization, which poses serious limits to emerging economies’ policy space. Second, the Fund keeps on stressing a separation of prudential financial regulation, which should be permanent, and temporary CFMs. Yet, the case studies presented here show that, especially for emerging markets with rather open and sophisticated domestic financial markets, both types of measures are interdependent and overlapping. Additionally, we demonstrate the relevance of a third type of regulation, lying on foreign exchange (FX) derivatives instruments, which may also be required to effectively manage foreign investors’ portfolio reallocations and their impact.
Subfields: Development, Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/343ed7fd76b484b9ca18fc0692c223a2c2ac09f7
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Development
In Economics and Econometrics
In Finance
Citations in the corpus
- Subordinated Financial Integration and Financialisation in Emerging Capitalist Economies: The Brazilian Experience (2018, background): “…scholars for many years (e.g. de Carvalho and Sicsú 2004, Ferrari Filho 2008, Palma and Ocampo 2008, Farhi and Cintra 2009, Gallagher et al. 2012, Fritz and Prates 2014), in this view the prudent, comprehensive, and potentially permanent management of capital account openness becomes a…”
- Keynes at the periphery: Currency hierarchy and challenges for economic policy in emerging economies (2017, background): “After the global financial crisis of 2008, several emerging economies also introduced capital account regulations in response to the new boom in capital flows, which came out with huge currency appreciation pressures and risk of credit and asset price booms (Fritz and Prates, 2014; IMF, 2012).”
- Financialization in Developing and Emerging Countries (2013, background): “Gabor (2010) analyzes the situation of Eastern European countries and highlights the role of central banks’ sterilization bonds in creating the pool of liquidity that banks used to engage in a range of risky (such as foreign currency lending to households) or effectively speculative (including carry”