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


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


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.

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  • Bikas Joshi & Manuela Goretti & Uma Ramakrishnan & Alun H. Thomas & Atish R. Ghosh & Juan Zalduendo, 2008. "Capital Inflows and Balance of Payments Pressures; Tailoring Policy Responses in Emerging Market Economies," IMF Policy Discussion Papers 08/2, International Monetary Fund.
  • Handle: RePEc:imf:imfpdp:08/2

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    References listed on IDEAS

    1. Khaled Sherif & Michael Borish & Alexandra Gross, 2003. "State-owned Banks in the Transition : Origins, Evolution, and Policy Responses," World Bank Publications, The World Bank, number 14851.
    2. Edda Zoli, 2001. "Cost and Effectiveness of Banking Sector Restructuring in Transition Economies," IMF Working Papers 01/157, International Monetary Fund.
    3. Tang, Helena & Zoli, Edda & Klytchnikova, Irina, 2000. "Banking crises in transition economies : fiscal costs and related issues," Policy Research Working Paper Series 2484, The World Bank.
    4. John Bonin & Bozena Leven, 2001. "Can State-owned Banks Promote Enterprise Restructuring? Evidence from One Polish Bank's Experience," Post-Communist Economies, Taylor & Francis Journals, vol. 13(4), pages 431-443.
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    Cited by:

    1. Jonathan David Ostry & Atish R. Ghosh & Karl F Habermeier & Marcos Chamon & Mahvash S Qureshi & Dennis B. S. Reinhardt, 2010. "Capital Inflows; The Role of Controls," IMF Staff Position Notes 2010/04, International Monetary Fund.
    2. Daria V Zakharova, 2008. "One-Size-Fits-One; Tailor-Made Fiscal Responses to Capital Flows," IMF Working Papers 08/269, International Monetary Fund.
    3. Sophocles Brissimis & George Hondroyiannis & Christos Papazoglou & Nicholas Tsaveas & Melina Vasardani, 2013. "The determinants of current account imbalances in the euro area: a panel estimation approach," Economic Change and Restructuring, Springer, vol. 46(3), pages 299-319, August.
    4. Ho-don Yan & Cheng-lang Yang, 2012. "Are there different linkages of foreign capital inflows and the current account between industrial countries and emerging markets?," Empirical Economics, Springer, vol. 43(1), pages 25-54, August.
    5. Marialuz Moreno Badia & Alex Segura-Ubiergo, 2014. "Real Exchange Rate Appreciation in Emerging Markets; Can Fiscal Policy Help?," IMF Working Papers 14/1, International Monetary Fund.
    6. Bank for International Settlements, 2009. "Capital flows and emerging market economies," CGFS Papers, Bank for International Settlements, number 33.
    7. Juda Agung & Solikin M Juhro & Harmanta & Tarsidin, 2016. "Managing monetary and financial stability in a dynamic global environment: Bank Indonesia s policy perspectives," BIS Papers chapters,in: Bank for International Settlements (ed.), Expanding the boundaries of monetary policy in Asia and the Pacific, volume 88, pages 157-188 Bank for International Settlements.


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