Capital Inflows and Balance of Payments Pressures: Tailoring Policy Responses in Emerging Market Economies

By Bikas Joshi, Manuela Goretti, Uma Ramakrishnan, Alun H. Thomas, Atish R. Ghosh, Juan Zalduendo

June 1, 2008

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Bikas Joshi, Manuela Goretti, Uma Ramakrishnan, Alun H. Thomas, Atish R. Ghosh, and Juan Zalduendo. Capital Inflows and Balance of Payments Pressures: Tailoring Policy Responses in Emerging Market Economies, (USA: International Monetary Fund, 2008) accessed November 9, 2024

Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Although capital inflows are generally beneficial to recipient countries, they also pose a challenge for the conduct of economic policy. This paper proposes a conceptual taxonomy to guide the design of policy responses in the face of capital flows. We explore how responses to capital surges should be differentiated based on the source of balance of payments pressures. We also examine whether the policy choices in emerging market countries conform to the taxonomy's predictions and find some correspondence, especially during periods of high global liquidity.

Subject: Balance of payments, Capital flows, Capital inflows, Current account balance, Current account deficits, Current account surpluses

Keywords: Appreciation, Appreciation pressure, Balance of payments, BOP pressure, Capital flows, Capital inflows, Current account, Current account balance, Current account deficits, Current account surpluses, East Asia, Exchange rate, Exchange rate appreciation, Financing Needs, Fiscal policy, Fiscal policy measure, Global, Middle East, PDP, Policy responses, Surplus

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Policy Discussion Paper No. 2008/002
Stock No:

PPIEA2008002
ISBN:

9781451945997
ISSN:

1564-5193

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