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  • Daria Zakharova
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    Abstract

    This paper surveys policy responses in recent years to capital inflows in a diverse group of countries that are represented by the Netherlands at the IMF Executive Board. Based on the findings from cross-country empirical literature, the paper distills some guiding principles for policy responses to excessive capital inflows, depending on country-specific circumstances and with a particular focus on fiscal policy. In addition to considering the conventional macroeconomic and structural policy tools, the paper also discusses the role of microfiscal policies in affecting the size and the composition of capital inflows. While conditions in these countries have changed very recently, the policy principles remain salient.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/269.

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    Length: 27
    Date of creation: 01 Dec 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/269

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    Related research

    Keywords: Capital inflows; Capital flows; Current account deficits; fiscal policy; excessive capital inflows; account deficits; fiscal tightening; current account deficit; fiscal stance; taxation; capital controls; composition of capital inflows; current account balance; fiscal policies; capital control; temporary capital inflows; capital markets; fiscal expansion; capital movements; capital outflows; government spending; capital stock; fiscal measures; fiscal positions; public spending; loose fiscal policy; tax policy; fiscal adjustment; capital market; capital inflow; capital adequacy ratio; capital adequacy; aggregate demand; management of capital inflows; credit expansion; fiscal policy response; management of capital flows; short-term capital inflows; reduction in government spending; real appreciation; short-term capital; expenditure policy; fiscal affairs department; excess demand; foreign borrowing; capital inflow episodes; fiscal discipline; capital market development; fiscal deficits; expansionary fiscal policies; volatility of inflows; fiscal space; fiscal policy management; public expenditure; fiscal consolidation; private inflows; fiscal affairs; tax revenues; fiscal costs; budget deficits; expansionary fiscal; fiscal sustainability; investor confidence; fiscal prudence; fiscal indicators; excess liquidity; fiscal response; tax systems; fiscal retrenchment; tax structures; tax incentives; domestic securities; flat tax; expenditure composition; strong capital inflows; hedging; fiscal restraint;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Sebastian Edwards, 2000. "Capital Flows, Real Exchange Rates, and Capital Controls: Some Latin American Experiences," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 197-246 National Bureau of Economic Research, Inc.
    2. Philip R. Lane & Roberto Perotti, 2001. "The Importance of Composition of Fiscal Policy: Evidence from Different Exchange Rate Regimes," CEG Working Papers 200111, Trinity College Dublin, Department of Economics.
    3. Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2004. "When it rains, it pours: Procyclical capital flows and macroeconomic policies," MPRA Paper 13883, University Library of Munich, Germany.
    4. Cottarelli, Carlo & Dell'Ariccia, Giovanni & Vladkova-Hollar, Ivanna, 2005. "Early birds, late risers, and sleeping beauties: Bank credit growth to the private sector in Central and Eastern Europe and in the Balkans," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 83-104, January.
    5. David Hauner, 2005. "A Fiscal Price Tag for International Reserves," IMF Working Papers 05/81, International Monetary Fund.
    6. Jesmin Rahman, 2008. "Current Account Developments in New Member States of the European Union," IMF Working Papers 08/92, International Monetary Fund.
    7. Leslie Lipschitz & Alex Mourmouras & Timothy D. Lane, 2002. "Capital Flows to Transition Economies," IMF Working Papers 02/11, International Monetary Fund.
    8. Michael Keen & Murtaza H. Syed, 2006. "Domestic Taxes and International Trade," IMF Working Papers 06/47, International Monetary Fund.
    9. Ivanna Vladkova Hollar & Giovanni Dell'Ariccia & Carlo Cottarelli, 2003. "Early Birds, Late Risers, and Sleeping Beauties," IMF Working Papers 03/213, International Monetary Fund.
    10. Guillermo A. Calvo, 2003. "Explaining Sudden Stops, Growth Collapse and BOP Crises: The Case of Distortionary Output Taxes," NBER Working Papers 9864, National Bureau of Economic Research, Inc.
    11. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
    12. Peter S. Heller, 1997. "Fiscal Policy Management in an Open Capital Regime," IMF Working Papers 97/20, International Monetary Fund.
    13. Paolo Mauro & Törbjörn I. Becker & Jonathan David Ostry & Romain Ranciere & Olivier Jeanne, 2007. "Country Insurance," IMF Occasional Papers 254, International Monetary Fund.
    14. Reinhart, Carmen & Montiel, Peter, 2001. "The Dynamics of Capital Movements to Emerging Economies During the 1990s," MPRA Paper 7577, University Library of Munich, Germany.
    15. Bikas Joshi & Manuela Goretti & Uma Ramakrishnan & Alun H. Thomas & Atish R. Ghosh & Juan Zalduendo, 2008. "Capital Inflows and Balance of Payments Pressures," IMF Policy Discussion Papers 08/2, International Monetary Fund.
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