IMF-Supported Programs in Capital Account Crises: Design and Experience

By Ales Bulir, Marianne Schulze-Gattas, Atish R. Ghosh, Alex Mourmouras, A. J Hamann, Timothy D. Lane

February 6, 2002

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Ales Bulir, Marianne Schulze-Gattas, Atish R. Ghosh, Alex Mourmouras, A. J Hamann, and Timothy D. Lane IMF-Supported Programs in Capital Account Crises: Design and Experience, (USA: International Monetary Fund, 2002) accessed November 9, 2024

Summary

This paper reviews the design of and experience with IMF-supported programs formulated in response to capital account crises in the 1990s, focusing on the experiences of eight countries: Turkey (1994), Mexico (1995), Argentina (1995), Thailand (1997), Indonesia (1997), Korea (1997), the Philippines (1997), and Brazil (1998). The capital account crises in emerging markets confronted both the affected countries and the IMF with a new set of challenges. The central feature of all these crises was the rapid reversal of capital inflows, bringing about a large and abrupt current account adjustment with pervasive macroeconomic consequences. The crises were characterized by an over-adjustment of external current accounts in relation to what was needed for any reasonable means of sustainability. This over-adjustment was associated with severe macroeconomic disruptions. Beyond the importance of crisis prevention, the experience of these countries suggests a number of lessons for program design in the context of high capital mobility—such as the appropriate roles for monetary, fiscal, and structural policies.

Subject: Balance of payments, Capital account crisis, Capital outflows, Current account, Economic sectors, Exchange rates, Fiscal policy, Foreign exchange

Keywords: Aggregate demand shock, Aggregate supply, Asia and Pacific, Capital account crisis, Capital account crisis country, Capital outflows, Crisis, Crisis case, Current account, Current account adjustment, East Asia, Exchange rate, Exchange rates, Financing, Financing package, Global, IMF-supported arrangement, OP

Publication Details

Pages:

94
Volume:

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DOI:

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Issue:

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Series:

Occasional Paper No. 2002/002
Stock No:

S210EA0000000
ISBN:

9781589060821
ISSN:

0251-6365

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