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Caught in the Crosswinds: The Experiences of Selected Economies Responding to External Volatility with Multiple Policy Levers

Author

Listed:
  • Ms. Ghada Fayad
  • Ms. Hélène Poirson

Abstract

A case study approach is used to assess the multi-pronged policy response of seven small financially open economies with flexible exchange rate regimes to external shocks following the global financial crisis. FX intervention was frequently used— including during outflow episodes to prevent disorderly depreciation and preserve financial stability. Monetary policy often considered both financial and external stability. Capital flow management measures were sometimes calibrated symmetrically over the cycle while macroprudential measures were mostly deployed during inflow episodes. Assessment of the macroeconomic conditions paints an inconclusive picture on the benefits or costs of such policies, suggesting the need for further analysis.

Suggested Citation

  • Ms. Ghada Fayad & Ms. Hélène Poirson, 2020. "Caught in the Crosswinds: The Experiences of Selected Economies Responding to External Volatility with Multiple Policy Levers," IMF Working Papers 2020/225, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2020/225
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    Cited by:

    1. Christopher Loewald, 2021. "Macro works applying integrated policy frameworks to South Africa," Working Papers 11016, South African Reserve Bank.
    2. Christopher Loewald, 2021. "Macro works a decisiontree approach to exchange rate policy," Working Papers 11009, South African Reserve Bank.
    3. Ferrero, Andrea & Habib, Maurizio Michael & Stracca, Livio & Venditti, Fabrizio, 2022. "Leaning against the global financial cycle," Working Paper Series 2763, European Central Bank.

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