A Modernized Approach to Managing the Risks in Cross-Border Capital Movements

July 1, 1999

Preview Citation

Format: Chicago

Inci Ötker, and R. B. Johnston A Modernized Approach to Managing the Risks in Cross-Border Capital Movements, (USA: International Monetary Fund, 1999) accessed September 20, 2024

Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper outlines a “modern” approach to managing risks in cross-border capital movements that is consistent with an environment of increased and liberalized capital flows. Key elements of this approach include: a consistent monetary and exchange rate policy mix to avoid incentives for volatile capital flows; prudential management of the specific risks in capital flows; supporting financial sector reforms; and appropriate sequencing of liberalization. The approach can reduce the potential size of the shocks associated with capital movements and increase the resilience of the financial system to such shocks when they occur; overtime, it is expected to reduce the need for recourse to capital controls.

Subject: Balance of payments, Capital controls, Capital flows, Exchange rate flexibility, Exchange rate policy, Exchange rates, Foreign exchange

Keywords: Capital, Capital controls, Capital flows, Capital mobility, Consistency of policy mix, Control, Cross-border capital movements, Exchange rate, Exchange rate flexibility, Exchange rate policy, Exchange rates, Global, Interest rate, Managed exchange rate arrangement, PDP, Policy consistency, Policy mix, Prudential risk management, Rates of return on asset, Risk, Risk exposure, Risk weight, Time consistency of exchange rate policy

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Policy Discussion Paper No. 1999/006
Stock No:

PPIEA0061999
ISBN:

9781451972092
ISSN:

1564-5193

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