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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 Ghosh () and Juan Zalduendo

No 08/2, IMF Policy Discussion Papers from International Monetary Fund

Abstract: 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.

Keywords: Economic policy; Balance of payments; Capital inflows; Capital flows; Developing countries; Policy Discussion Paper; policy responses, current account, exchange rate, (search for similar items in EconPapers)
Pages: 21
Date: 2008-06-01
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Handle: RePEc:imf:imfpdp:08/2