Capital flows, exchange rate management and monetary policy

C. Rangarajan and A. Prasad

Macroeconomics and Finance in Emerging Market Economies, 2008, vol. 1, issue 1, 135-149

Abstract: Capital inflows have brought substantial macro and financial benefits; at the same time, the size and nature of capital inflows have complicated macroeconomic management in recipient countries. Multiple concerns have produced multiple responses by countries to capital inflows. Countries have pursued a combination of policies - let the exchange rate appreciate, accumulate foreign exchange reserves, with or without sterilization, liberalize outflows, tighten monetary and fiscal policies and in a few cases impose capital controls on inflows either directly or through prudential regulation. Experience shows that there are no corner solutions and countries have to resort to a judicious mix of these policies depending on the prevailing circumstances.

Keywords: monetary policy; capital flows; exchange rate management; central banking (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/17520840701859534

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