The Fund's Role Regarding Cross-Border Capital Flows


Date: November 15, 2010
 
Electronic Access: Full Text

 
Summary:Global capital flows have multiplied many times over in recent years, mainly between advanced economies but increasingly also to emerging markets, reflecting the general reduction in regulatory and informational barriers. Thus, with international asset positions now dwarfing output, global portfolio allocations and reallocations have profound effects on the world economy, as demonstrated by recent boombust episodes of both global reach (e.g., the transmission of the 2001 IT shock and the 2008 mortgage market shock from the United States) and regional significance (in Asia, Latin America, and Central and Eastern Europe). Such cycles and reversals in cross-border capital flows should not be surprising, given that these flows - more so than domestic ones - imply crossing informational barriers, currency and macroeconomic risks, and regulatory regimes.

 
Series : Policy Paper
Subject(s): Capital flows | Developed countries | Emerging markets | Fund role | Bilateral surveillance | Multilateral surveillance | Capital controls
Notes: This paper was the basis for a preliminary discussion by the Board on the topic of the Fund's role in capital flows. In the course of 2011, the Fund will carry out extensive analytical work, taking into account country experiences, to inform policy guidance on capital flows and help countries maximize the benefits from these flows while meeting any associated policy challenges. The Fund will communicate on this work as it progresses.