## _wp08269

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### I. Introduction and scope
- Surveys policy responses to capital inflows in the IMF and World Bank Netherlands-led constituency (the “G-11”).
- Focuses on 11 countries (excluding Israel and the Netherlands) that experienced large capital inflows and labels them G-11 for brevity.
- Notes that the G-11 experienced large capital account surpluses leading up to the recent financial crisis, accompanied by sizable current account deficits that in some cases exceeded equilibrium levels implied by fundamentals.
- Observes that imbalances increased over time, with larger current account deficits financed by even larger capital inflows in some countries, and several economies showed signs of overheating.
- Paper first presented at a meeting of the Netherlands-led IMF and World Bank constituency in Amsterdam, the Netherlands, on June 7, 2008.

### II. Capital inflows in the G-11 — recent experience and stylized facts
- Cross-country patterns
  - Many emerging markets experienced current account and capital account surpluses during 2003–07 and built up sizable reserves.
  - In recent years most G-11 saw sizable current account deficits accompanied by equal or larger capital account surpluses.
  - Updated estimates indicated most G-11 countries still had considerable room to expand bank credit to the private sector, provided global liquidity conditions remained favorable.
- Sectoral and compositional notes
  - FDI concentrated in manufacturing and services (financial intermediation, transport and communication, utilities) but a sizable portion also went into nontradable sectors (real estate, construction, trade).
- Specific estimated imbalances
  - Current account deficits in Cyprus, Romania, Bulgaria, Georgia, and Bosnia and Herzegovina exceeded equilibrium estimates by 4–8 percentage points of GDP.

### III. Risks associated with capital inflows (stylized)
- Overheating
  - Large inflows over short spans can finance rapid credit expansion, fuel domestic demand and inflation, and lead to real exchange rate overshooting and unsustainable current account deficits.
  - Some G-11 countries exhibited signs of overheating pre-crisis: fast credit growth, strong domestic demand, booming stock markets; inflation picked up to double digits in Bulgaria, Georgia, Moldova, and Ukraine.
- Financial instability
  - Inflows can fuel credit booms and asset-price bubbles, weaken credit quality, exacerbate currency and maturity mismatches, and produce credit crunches on asset-price corrections.
- Sudden stops
  - Abrupt reversal of inflows may cause reserve losses and severe recession.
- Composition matters
  - High share of FDI is a comfort factor: FDI flows have been remarkably stable around sudden stops.
  - FDI can still be volatile in isolated cases (example referenced: Russia post-1998).
- Empirical caution
  - 15 percent of past large inflow episodes completed between 1987 and 2004 ended up in a crisis.

### IV. Policy responses observed in the G-11 — frequency and patterns
- Most common measures
  - Sterilized intervention: frequently used to mop up excess liquidity and contain exchange rate appreciation pressures.
  - Strengthening financial supervision and prudential regulation: aimed at containing financial sector vulnerabilities from foreign-financed credit expansion.
- Capital controls and prudential measures
  - Examples include reserve requirements on inflows, ceilings on credit growth, lending-to-household limits, and risk-based capital charges or marginal reserve requirements for excessive credit growth.
- Fiscal policy patterns
  - Fiscal tightening was recommended in 9 out of 11 countries but implemented in just 3 countries.
  - Real public spending growth exceeded real GDP growth in the G-11 as a group.
  - For ten G-11 countries with structural balance estimates during 2003–07: structural balances improved in 3 (Bosnia and Herzegovina, Croatia, Cyprus), remained broadly unchanged in 2 (Bulgaria, Macedonia), and deteriorated in 5 (Armenia, Georgia, Moldova, Romania, Ukraine).
- Least common response
  - Nominal exchange rate appreciation was rare, reflecting pegged exchange rate regimes in some countries and already large current account deficits in others.

### V. Tailoring policy responses — guiding principles
- Key diagnostic criteria
  - Country initial conditions (current account and fiscal positions).
  - Causes and composition of inflows (temporary vs persistent; share of FDI; terms and use of foreign credit; domestic asset price developments).
- Distinguishing inflow types
  - Temporary inflows: ad hoc factors, speculative/herd behavior, or one-off receipts (e.g., privatization receipts). Fiscal policy is not particularly effective for temporary private inflows.
  - Persistent excess inflows: underlying disequilibrium, possibly induced by loose fiscal policy, monetary and exchange rate policies, or exchange rate misalignment.

### VI. Managing temporary capital inflows — short-term tools
- Sterilized intervention
  - Aims to limit liquidity effects of FX purchases and resist exchange rate overshooting by selling domestic securities or increasing reserve requirements.
  - Can be costly: return on reserves tends to be lower than interest paid on domestic debt and is unsustainable over long periods.
  - Hauner (2005) estimates quasi-fiscal costs of sterilized intervention in Emerging Europe and Middle East and Central Asia in the range of 0.5-0.6 percent of GDP per year.
  - Recent studies find short-term inflow episodes (duration < two years) typically featured stronger sterilized intervention, more limited real exchange rate appreciation, and better post-inflow growth performance.
- Capital controls and prudential measures
  - Modern controls often implemented via reserve requirements on capital inflows; prudential measures aim to lengthen maturities and change composition.
  - Consensus: such measures can temporarily lengthen maturities and change composition but do not appear to affect the size of inflows; effectiveness may decline as markets adapt.
  - Preconditions for effectiveness: good governance and administrative capacity.

### VII. Responding to persistent capital inflows — the role of fiscal policy
- Loose fiscal policy as a driver
  - Strong causality documented between debt-financed fiscal expansion and capital inflows.
  - Mechanism: loose fiscal policy → excess demand → excessive current account deficit (twin deficit) → higher interest rates attracting inflows.
  - Policy prescription: fiscal tightening to reduce overheating and contain excessive inflows, while avoiding procyclical fiscal policy that amplifies cycles.
  - WEO evidence: strong increases in government spending during inflow periods are typically associated with hard landing; lower spending leads to lower real appreciation and reduced risk of exchange rate overshooting.
  - Importance of structural balances: assess fiscal stance using structural balances adjusted for cyclical factors because conventional overall balance may hide underlying fiscal expansion during revenue booms.
- Exchange rate misalignment cases
  - Undervalued exchange rate with current account surplus: appropriate response is exchange rate appreciation; fiscal tightening not very helpful and fiscal expansion may be needed to support demand during appreciation.
  - Overvalued exchange rate with excessive current account deficit: right solution is allow exchange rate to devalue; fiscal tightening can help but has limited effect due to rigidities and political constraints; formal pegs complicate handling and can provoke overshooting.
- Micro-fiscal instruments
  - Expenditure policy: shift spending away from nontradables and reduce government purchases of imports to strengthen the current account and reduce inflationary pressure.
  - Public sector wage policy: limit wage increases to contain demand pressures and second-round inflation.
  - Tax policy: avoid tax structures and incentives that favor debt-financed investment or nontradables (e.g., generous depreciation allowances, full deductibility of interest, low real estate taxation) as these can fuel asset bubbles and overheating.
  - Debt management: reduce reliance on FX-denominated debt, lengthen maturities, retire expensive debt, and build buffers to reduce vulnerability to reversals.

### VIII. Mitigating risks — adaptation and structural policies
- Improve competitiveness through structural reforms:
  - Invest in education and training.
  - Strengthen property rights.
  - Reduce cost of doing business.
  - Increase productivity of public expenditure, especially infrastructure, consistent with absorptive capacity and public financial management.
- Reduce financial sector vulnerabilities:
  - Strengthen supervision, improve risk management, expand stress testing, improve cross-border supervisory coordination, enhance credit registries.
  - Develop capital markets and encourage alternative funding sources and hedging to reduce volatility of inflows.
- These measures help sustain appreciation caused by inflows and lower the risk of sudden reversals.

### IX. Conclusion — policy implications
- Appropriate response depends on the nature and cause of inflows:
  - Sterilized intervention and capital controls can help with temporary inflows but are costly and ineffective against persistent inflows stemming from underlying imbalances.
  - Persistent imbalances should be addressed via fiscal and monetary policy, including exchange rate policy.
- Fiscal tightening is useful when a country runs an excessive current account deficit or to contain overheating but is less effective when exchange rate misalignment is the main cause; avoid procyclical fiscal policies.
- Diagnose both macro-fiscal stance and micro-fiscal distortions (tax policy); avoid distortionary tax measures that induce excessive inflows.
- Early preventive measures—structural reforms and strengthened financial supervision—can avert serious macroeconomic imbalances.

*Source: _wp08269 (IMF staff paper; excerpts provided).*

### References..............................................................................................................

### _wp08269 - References

### I. Introduction
- Paper surveys policy responses to capital inflows in a diverse group of countries represented by the Netherlands at the IMF and the World Bank Executive Board (the “G-11” countries).
- The G-11 experienced large capital account surpluses in the years leading up to the recent financial crisis events.
- These surpluses were accompanied by sizable current account deficits that, in some countries, exceeded equilibrium levels implied by economic fundamentals.
- Imbalances increased over time, with larger current account deficits financed by even larger capital inflows in some countries, and several economies showed signs of overheating.
- While high capital inflows were not initially inconsistent with low initial levels of capital stock and high returns on investment, they later posed reversal risks and macroeconomic stability concerns.

### Country coverage and presentation
- The IMF’s Netherlands' constituency consists of: Armenia (ARM), Bosnia and Herzegovina (BIH), Bulgaria (BGR), Croatia (HRV), Cyprus (CYP), Georgia (GEO), Israel (ISR), Macedonia (MKD), Moldova (MDA), Montenegro (MNE), the Netherlands (NDL), Romania (ROM), and Ukraine (UKR).
- This paper focuses on the 11 countries (excluding Israel and the Netherlands) that experienced large capital inflows and labels them G-11 for brevity.
- The paper was first presented at a meeting of the Netherlands-led IMF and World Bank constituency in Amsterdam, the Netherlands, on June 7, 2008.

### Assessment of capital inflows and macroeconomic consistency
- The paper considers whether the rapid increase in capital inflows was consistent with macroeconomic fundamentals in the G-11.
- It describes policy measures undertaken to manage inflows, emphasizing the most commonly used short-term policy tools.

### Findings on policy responses across G-11 countries
- Most countries used available short-term policy tools to address capital inflows.
- Sterilized intervention and capital control measures were among the most common policy responses.
- Fiscal tightening was undertaken in less than half of the countries; in some cases fiscal policy was procyclical.
- The least common response was exchange rate appreciation, reflecting pegged exchange rate regimes in some countries and already large current account deficits in others.

### Discussion of broader policy considerations
- The paper draws on cross-country empirical literature to propose guiding principles for policy responses to excessive capital inflows, with a particular focus on fiscal policy and country-specific circumstances.
- While these recommendations may seem less urgent amid potential capital flight during the financial crisis, imprudent management of prior capital inflows likely exacerbated macroeconomic fallout in some countries.
- The episode of excessive capital inflows resulting in a sudden stop offers important lessons for managing capital flows to promote development while containing macroeconomic risks.

*Source: _wp08269 - References (Excerpt: Introduction and overview), presented June 7, 2008.*

### Section III proposes some guiding principles on managing capital inflows, depending on the

### _wp08269 - Section III proposes some guiding principles on managing capital inflows, depending on the

### II. CAPITAL INFLOWS IN THE G-11 COUNTRIES — Recent experience and stylized facts
- Emerging markets as a group experienced large current account surpluses accompanied by strong capital inflows during the past few years up until the recent financial crisis, allowing them to build up sizable reserves (Figure 1).
- Many emerging markets experienced a combination of current account and capital account surpluses during 2003–07 (Figure 1).
- G-11 countries: in recent years most saw sizable current account deficits accompanied by equal or larger capital account surpluses (Figure 2). Imbalances increased with larger current account deficits financed by even larger capital inflows in some countries (Figure 2).
- Large capital inflows can be benign when they are a market response to high returns on investment and scarcity of capital, particularly in former transition economies with low or obsolete initial capital stock.
- Empirical estimates suggested potential future equilibrium capital inflows for Central and Eastern European countries could exceed their GDP by several times (Lipschitz et al., 2002). Updated estimates indicated most G-11 countries still had considerable room to expand bank credit to the private sector, provided global liquidity conditions remained favorable (Figure 3).

### II.A. Risks associated with capital inflows (stylized)
- Overheating
  - Large inflows over short spans can finance rapid credit expansion, fuel domestic demand and inflation, and lead to real exchange rate overshooting and unsustainable current account deficits.
  - Empirical evidence suggests capital inflows can be procyclical (Murthy and Phillips, 1996; Kaminsky et al., 2004).
  - Some G-11 countries exhibited signs of overheating pre-crisis: fast credit growth, strong domestic demand, booming stock markets (Figure 4); inflation picked up to double digits in Bulgaria, Georgia, Moldova, and Ukraine.
  - Estimates: current account deficits in Cyprus, Romania, Bulgaria, Georgia, and Bosnia and Herzegovina exceeded equilibrium estimates by 4–8 percentage points of GDP (Figure 5).
- Financial instability
  - Capital inflows can fuel credit booms and asset price bubbles, weaken credit quality, exacerbate currency and maturity mismatches, and produce credit crunches on asset-price corrections.
- Sudden stops
  - Abrupt reversal of inflows may cause reserve losses and severe recession (Calvo and Reinhart, 2000).
- Composition matters
  - High share of FDI is a comfort factor: FDI flows have been remarkably stable around sudden stops (Becker et al., 2007; Figure 6).
  - FDI avoids immediate direct increases in payments abroad when world interest rates rise and boosts domestic production and technology transfer.
  - Nonetheless, FDI can be volatile in isolated cases (example given: Russia post-1998).
- Sectoral allocation of FDI
  - G-11 countries benefited from FDI into manufacturing and services (financial intermediation, transport and communication, utilities) that can enhance productivity, but a sizable portion went into nontradable sectors (real estate, construction, trade) potentially contributing to unsustainable asset price increases (Table 1).

### II.B. Policy response to capital inflows — observed measures and frequency
- Most common responses in G-11:
  - Sterilized intervention (frequently used to mop up excess liquidity and contain exchange rate appreciation pressures).
  - Strengthening financial supervision and prudential regulation (aimed at containing financial sector vulnerabilities from foreign-financed credit expansion).
- IMF recommended marginal reserve requirements for excessive credit growth in some countries; several countries adopted ceilings on credit growth and lending to households, sometimes going beyond IMF advice.
- Least common response: nominal exchange rate appreciation, reflecting pegged exchange rate regimes in some countries.
- Fiscal policy:
  - Fiscal tightening was recommended in 9 out of 11 countries but implemented in just 3 countries.
  - Reasons for nonimplementation: authorities more sanguine about external risks, large social and infrastructure needs, broadly sustainable fiscal positions, fragile political environments.
- Procyclicality
  - Real public spending growth exceeded real GDP growth in G-11 as a group (Figure 9, top panel).
  - For ten G-11 countries with structural balance estimates during 2003–07: structural balances improved in 3 (Bosnia and Herzegovina, Croatia, Cyprus), remained broadly unchanged in 2 (Bulgaria, Macedonia), and deteriorated in 5 (Armenia, Georgia, Moldova, Romania, Ukraine).

### III. TAILORING POLICY RESPONSE TO COUNTRY-SPECIFIC CIRCUMSTANCES — guiding principles
- Appropriate responses depend on:
  - Country initial conditions (current account and fiscal positions).
  - Causes and composition of inflows (temporary vs persistent; share of FDI; terms and use of foreign credit; domestic asset price developments).
- Distinguishing inflows:
  - Temporary inflows: ad hoc factors, speculative/herd behavior, or one-off receipts (e.g., privatization receipts). Fiscal policy is not particularly effective for temporary private inflows.
  - Persistent excess inflows: underlying disequilibrium, possibly induced by loose fiscal policy, monetary and exchange rate policies, or exchange rate misalignment.

### III.A. Managing temporary capital inflows — short-term tools
- Sterilized intervention
  - Aims to limit liquidity effects of FX purchases and resist exchange rate overshooting; achieved by selling domestic securities or increasing reserve requirements.
  - Can be costly: return on reserves tends to be lower than interest paid on domestic debt; unsustainable over long periods (Hauner, 2005; Dieterich, 2008).
  - Recent studies (IMF, 2007a) find episodes of short-term inflows (duration < two years) typically featured stronger sterilized intervention, more limited real exchange rate appreciation, and better post-inflow growth performance.
  - Examples: Hungary in the 1990s and China until recently; captive capital markets can limit sterilization costs.
  - Hauner (2005) estimates quasi-fiscal costs of sterilized intervention in Emerging Europe and Middle East and Central Asia in the range of 0.5-0.6 percent of GDP per year.
- Capital control and prudential measures
  - Modern capital controls often realized via reserve requirements on some or all capital inflows (examples cited: Chile 1990; Thailand 2006).
  - Prudential measures include: raising minimum capital-adequacy ratios; strengthening loan-loss provisioning; limits on FX exposure; ceilings on short-term external borrowing or credit growth; mandatory loan-to-income or loan-to-value limits; risk-based capital charges or marginal reserve requirements for excessive credit growth.
  - Consensus: these measures can temporarily lengthen maturities and change composition but do not appear to affect the size of inflows (Forbes 2003; Montiel and Reinhart 1999). Effectiveness may decline as markets adapt; good governance and administrative capacity are preconditions (Kawagi and Takagi, 2004).
- Empirical note: sterilized intervention and capital controls were used relatively frequently in the G-11, but many inflows proved to be persistent underlying disequilibria, requiring different responses.

### III.B. Responding to persistent capital inflows — the role of fiscal policy (macroeconomic and micro-fiscal)
- Three common causes of excessive inflows addressed: loose fiscal policy; undervalued exchange rate; unsustainable current account deficit (overvalued exchange rate).
- Loose fiscal policy
  - Strong causality between debt-financed fiscal expansion and capital inflows (Murthy and Phillips, 1996; Kaminsky et al., 2004).
  - Loose fiscal policy → excess demand → excessive current account deficit (twin deficit) → higher interest rates attracting inflows.
  - Policy prescription: fiscal tightening to reduce overheating and contain excessive inflows.
  - Avoid procyclical fiscal policies; procyclicality can create a spiral: inflows → revenue boom → higher spending → overheating → higher interest rates → more inflows.
  - WEO evidence: strong increases in government spending during inflow periods are typically associated with hard landing; lower spending leads to lower real appreciation and reduced risk of exchange rate overshooting (IMF, 2007a).
  - Assess fiscal stance using structural balances adjusted for cyclical factors; conventional overall balance may not reveal underlying fiscal expansion during inflow-induced revenue booms.
- Undervalued exchange rate with current account surplus
  - Inflows may be caused by undervalued exchange rate under pegged or managed regimes or by attempts to run independent monetary policy with a peg.
  - Appropriate response: allow exchange rate to appreciate. Fiscal tightening is not very helpful and a fiscal expansion may be needed to support aggregate demand when exchange rate appreciates.
  - Few G-11 countries fall into this category; IMF recommended appreciation in some cases and it was allowed in two out of four cases where recommended.
- Overvalued exchange rate with excessive current account deficit
  - Right solution: allow exchange rate to devalue. Fiscal tightening can help contain the current account deficit and induce depreciation via lower interest rates and inflation, but fiscal role is limited due to price/wage rigidities and political constraints.
  - Handling overvaluation is difficult under a formal peg; past step depreciations caused rush-to-the-exit and overshooting.
- Micro-fiscal policy responses
  - Expenditure policy: shift spending composition away from nontradables to reduce inflation and real appreciation; reduction in government purchases of imports strengthens external current account.
  - Public sector wage policy: reducing government wage spending can contain demand pressures and second-round inflation effects; increases in public sector wages are hard to reverse.
  - Tax policy:
    - Capital inflows including FDI are sensitive to taxation (Alworth and Arachi, 2007; Keen and Syed, 2006).
    - Tax structure can favor debt-financed investment (generous depreciation allowances, full deductibility of interest), incentivizing external borrowing when domestic savings are insufficient.
    - Taxation bias favoring nontradables (e.g., low real estate taxation, deductibility of mortgage interest, housing subsidies) can fuel asset bubbles and overheating.
    - Price-based capital controls are essentially taxes and can be distortionary; distortionary tax increases to tighten fiscal policy may inhibit growth and precipitate crisis (Calvo, 2003).
    - Best practice: avoid introducing distortionary tax measures that induce excessive inflows.
  - Debt management
    - Choices about domestic vs external borrowing affect inflows. Prudent management includes retiring expensive debt, reducing reliance on FX-denominated debt, lengthening maturities, and building financial buffers to reduce vulnerability to sudden reversals.

### III.C. Mitigating the risks of excessive capital inflows — adaptation policies
- When cause is uncertain, pursue pre-emptive and adaptation measures:
  - Improve competitiveness via structural reforms:
    - Invest in education and training.
    - Strengthen property rights.
    - Reduce cost of doing business.
    - Increase productivity of public expenditure, especially infrastructure, consistent with absorptive capacity and public financial management.
  - Reduce financial sector vulnerabilities:
    - Strengthen supervision, improve risk management, expand stress testing, improve cross-border supervisory coordination, enhance credit registries.
    - Develop capital markets and encourage alternative funding sources and hedging to reduce volatility of inflows (IMF GFSR, October 2007, Chapter 3).
  - These reforms help sustain appreciation caused by inflows and lower the risk of sudden reversals.
- Empirical caution: 15 percent of past large inflow episodes completed between 1987 and 2004 ended up in a crisis (Schadler, 2008).

### IV. CONCLUSION — summary policy implications
- The financial crisis highlighted the importance of managing capital flows effectively; many emerging markets and some G-11 countries suffered from loss of investor confidence and capital outflows.
- Appropriate policy depends on nature and cause of inflows:
  - Sterilized intervention and capital controls can help with temporary inflows but are costly and ineffective against persistent inflows stemming from underlying imbalances.
  - Persistent imbalances should be addressed via fiscal and monetary policy, including exchange rate policy.
- Fiscal tightening is not a panacea:
  - Useful when a country is running an excessive current account deficit or to contain overheating.
  - Less effective when exchange rate misalignment is the main cause; fiscal tightening can be politically difficult and constrained by fiscal space and core public functions.
  - Avoid procyclical fiscal policies; adopt cautious fiscal policy during good times to retain room for expansion during downturns.
- Analyze both macro-fiscal stance and micro-fiscal distortions (tax policy) when diagnosing inflows; avoid tax structures that induce excessive capital flows.
- Early and preventive measures—structural reforms and strengthened financial supervision—can avert serious macroeconomic imbalances.

*Source: IMF staff paper (excerpts provided in the supplied content).*

### REFERENCES

### _wp08269 - REFERENCES

### Fiscal policy and taxation
- Alworth, Julian, and G. Arachi, 2007, “Taxation policy in EMU,” paper presented at the EMU@10 years Conference held in Brussels on November 26–27.
- Balassone, Fabrizio, and M. Kumar, 2007, “Cyclicality of Fiscal Policy” and “Addressing the Procyclical Bias,” in Promoting Fiscal Discipline, Manmohan Kumar and Teresa Ter-Minassian, (eds.) (Washington, D.C.: International Monetary Fund).
- Froot, Kenneth, and K. Rogoff, 1991, “Government Consumption and the Real Exchange Rate: The Empirical Evidence,” NBER Working Paper.
- Heller, Peter, 1997, “Fiscal Policy Management in an Open Capital Regime,” Working Paper No. 20, (Washington, D.C.: International Monetary Fund).
- Keen, Michael, and M. Syed, 2006, “Domestic Taxes and International Trade: Some Evidence,” Working Paper, No. 47, (Washington, D.C.: International Monetary Fund).
- Lane, Philip, and R. Perotti, 2003, “The Importance of Composition of Fiscal Policy: Evidence from Different Exchange Rate Regimes,” Journal of Public Economics 87 (2003), pp. 2253–79.
- Vasudeva Murthy, N. R., and J. Phillips, 1996, “The Relationship between Budget Deficits and Capital Inflows: Further Econometric Evidence,” in the Quarterly Review of Economics and Finance, Vol. 36, No. 4, Winter 1996, pages 485–94.

### Capital flows, sudden stops, and policy responses
- Calvo, Guillermo, 2003, “Explaining Sudden Stops, Growth Collapse, and BOP Crisis: The Case of Distortionary Output Taxes,” NBER Working Paper No. 9864.
- Calvo, Guillermo A., and C. Reinhart, 2000, “When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options,” in Peter Kenen and Alexandre Swoboda, Key Issues in Reform of the International Monetary and Financial System, (Washington D.C.: International Monetary Fund), pp. 175–201.
- Kaminsky, Graciela L., C. Reinhart, and C. Vegh, 2004, “When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies, NBER Working Paper No. 10780.
- Montiel, Peter and C. Reinhart, 1999, “The Dynamics of Capital Movements to Emerging Economies During the 1990s,” in Griffith-Jones, Montes (eds.), Short-term Capital Movements and Balance of Payments Crisis, Oxford: Oxford University Press, 1999.
- Ghosh, Atish R, M. Goretti, B. Joshi, U. Ramakrishnan, A. Thomas, J. Zalduendo, 2008, “Capital Inflows and Balance of Payments Pressures—Tailoring Policy Responses in Emerging Market Economies,” IMF Policy Discussion Paper No. 2, (Washington, D.C.: International Monetary Fund).
- Schadler, Susan, 2008, “Managing Large Capital Inflows: Taking Stock of International Experiences,” Asian Development Bank Institute Discussion Paper, No. 97, (Tokyo: ADB Institute).
- Schadler, Susan, “Recent Experience with Surges in Capital Inflows,” Occasional Paper No. 108, (Washington, D.C.: International Monetary Fund).
- Kawai, Masahiro, and S. Takagi, 2008, “Managing Capital Inflows: An East Asian Perspective,” draft paper.
- Kawai, Masahiro, and S. Takagi, 2004, “Rethinking Capital Controls: The Malaysian Experience,” Suthiphand Chirathivat, Emile-Maria Claassen and Juergen Schroeder (eds.), East Asia’s Monetary Future: Integration in the Global Economy, Chelternham UK and Northampton MA: Edward Elgar, pp. 182–214.
- Forbes, Kristin J., “Capital Flows, Real Exchange Rates, and Capital Controls: Some Latin American Experiences,” National Bureau of Economic Research, Cambridge MA, Working Paper, No. 6800, November 1998.
- Lipschitz, Leslie, T. Lane, and A. Mourmouras, 2002, “Capital Flows to Transition Economies: Master or Servant?” Working Paper No. 11, (Washington, D.C.: International Monetary Fund).
- Cottarelli, Carlo, G. Dell’Ariccia, I. Vlandkova-Hollar, 2003, “Early Birds, Late Risers, and Sleeping Beauties: Bank Credit Growth to the Private Sector in Central and Eastern Europe and the Balkans,” Working Paper No. 213, (Washington, D.C.: International Monetary Fund).
- Rahman, Jesmin, 2008, “Current Account Developments in New Member States of the European Union: Equilibrium, Excess, and EU-Phoria,” Working Paper No. 92, (Washington, D.C.: International Monetary Fund).

### Exchange rate effects, reserves, and balance of payments
- IMF, 1995, Exchange Rate Effects of Fiscal Consolidation, Annex in October 1995 World Economic Outlook, (Washington, D.C.: International Monetary Fund).
- Hauner, David, 2005, “A Fiscal Price Tag for International Reserves,” Working Paper No. 81, (Washington, D.C.: International Monetary Fund).
- Dieterich, Christine, 2008, “Policy Options for Managing Foreign Exchange Inflows: Lessons for Georgia from International Experience,” manuscript.
- Froot, Kenneth, and K. Rogoff, 1991, “Government Consumption and the Real Exchange Rate: The Empirical Evidence,” NBER Working Paper.
- Calvo, Guillermo A., and C. Reinhart, 2000, “When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options,” in Peter Kenen and Alexandre Swoboda, Key Issues in Reform of the International Monetary and Financial System, (Washington D.C.: International Monetary Fund), pp. 175–201.

### IMF analyses and broader globalization themes
- IMF, 2007a, Globalization and Inequality, October 2007 World Economic Outlook, (Washington, D.C.: International Monetary Fund).
- IMF, 2007b, “Globalization, Financial Market, and Fiscal Policy,” Board Paper, No. 372, (Washington, D.C.: International Monetary Fund).
- Becker, Torbjorn, O. Jeanne, P. Mauro, J. Ostry, R. Ronciere, 2007, “Country Insurance: The Role of Domestic Policies,” Occasional Paper No. 254, (Washington, D.C.: International Monetary Fund).

### Other empirical and thematic contributions
- Montiel, Peter and C. Reinhart, 1999, “The Dynamics of Capital Movements to Emerging Economies During the 1990s,” in Griffith-Jones, Montes (eds.), Short-term Capital Movements and Balance of Payments Crisis, Oxford: Oxford University Press, 1999.
- For topics on procyclicality and macroeconomic policy: Kaminsky, Graciela L., C. Reinhart, and C. Vegh, 2004, “When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies, NBER Working Paper No. 10780.
- Rahman, Jesmin, 2008, “Current Account Developments in New Member States of the European Union: Equilibrium, Excess, and EU-Phoria,” Working Paper No. 92, (Washington, D.C.: International Monetary Fund).

*Source: _wp08269 - REFERENCES*

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