EconPapers    
Economics at your fingertips  
 

Alternate instruments to manage the capital flow conundrum: A study of selected Asian economies

Rajeswari Sengupta and Abhijit Sen Gupta

Pacific Economic Review, 2019, vol. 24, issue 2, 241-268

Abstract: Capital inflows to and outflows from emerging market economies (EME) have increased significantly since 2000. This rapid increase, accompanied by a sharp rise in volatility, has amplified the complexity of macroeconomic management in EME. While foreign capital provides additional financing for productive investment and offers avenues for risk diversification, unbridled flows exacerbate financial and macroeconomic instability. In this paper, we focus on the experience of six emerging Asian economies (EAE) in dealing with capital flows. Using quarterly data, we identify the waves of capital flows experienced by these EAE and the efficacy of the various policy measures taken. The policy choices include negotiating the trilemma (i.e. balancing the need for monetary policy autonomy, exchange rate flexibility and capital account openness), as per the demands of the macroeconomic situation. The paper also analyses the extent to which intervention in the foreign exchange market and imposition of short‐term capital flow management measures have aided countries to negotiate the trilemma. The efficacy of these responses have been varied across countries, implying that a judicious mix of these measures, along with improvement in financial and institutional development, is required to effectively counter the vagaries of capital flows.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/1468-0106.12296

Related works:
Working Paper: Alternate instruments to manage the capital flow conundrum: A Study of selected Asian economies (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:pacecr:v:24:y:2019:i:2:p:241-268

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1361-374X

Access Statistics for this article

Pacific Economic Review is currently edited by Kenneth S. Chan and Yin-wong Cheung

More articles in Pacific Economic Review from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-31
Handle: RePEc:bla:pacecr:v:24:y:2019:i:2:p:241-268