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Managing the Risks Associated with Volatile Capital Flows

  • Atish R. Ghosh
Chapter

Abstract

Against the backdrop of increasingly volatile capital flows to emerging market economies (EMEs), this note proposes three principles to guide policy: (i) neither capital controls nor other policies should be used to avoid warranted external adjustment; (ii) both residency-based capital controls and non-residency based prudential measures may be necessary to safeguard financial stability, depending upon the nature of flows and the circumstances facing the country; and (iii) policies should take account of multilateral considerations. These principles, which entail measures by both the recipients and the sources of capital, should allow countries to reap the benefits of cross-border flows while also minimizing the risks and challenges associated with them.

Keywords

Real Exchange Rate Capital Flow Source Country Recipient Country Capital Inflow 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer India 2014

Authors and Affiliations

  1. 1.Research DepartmentInternational Monetary FundWashingtonUSA

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