Implications of a Surge in Capital Inflows: Available tools and Consequences for the Conduct of Monetary Policy

Jang-Yung Lee

No 1996/053, IMF Working Papers from International Monetary Fund

Abstract: This paper seeks to extend discussion of monetary policy instruments to the situation of a country faced with major capital inflows when the process of domestic financial liberalization is incomplete. It briefly summarizes the recent usage of traditional monetary instruments, discusses the practical limits to classic sterilization measures as well as the pros and cons of using other supplementary measures including tax-based controls on capital inflows. It also examines the efficacy of such measures in Chile, Colombia, Indonesia, Korea, Spain, and Thailand. The conclusion is that, for a time and as a transitional measure, a country may find it opportune to supplement the traditional instruments with certain “belt and braces” measures including, in some instances, indirect (tax-based) capital controls.

Keywords: WP; forward market; foreign exchange; capital control; rate of interest; market intervention; monetary policy; cost of capital; central bank bank paper; swap contract; national interest; adjustable peg; rate of return; forward exchange market; swap market; national interest rate differential; market rate of interest; discount policy; market rate; Capital inflows; Sterilization; Open market operations; Capital flows; Capital controls; Europe (search for similar items in EconPapers)
Pages: 66
Date: 1996-05-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=2045 (application/pdf)

Related works:
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:imf:imfwpa:1996/053

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().