Statement by the Managing Director on the Independent Evaluation Office Report on IMF Advice on Capital Flows Executive Board Meeting September 18, 2020
Policy Papers, September 30, 2020
Source details
- Canonical URL
- Statement by the Managing Director on the Independent Evaluation Office Report on IMF Advice on Capital Flows Executive Board Meeting September 18, 2020
Other formats
Bibliographic details
- Published: September 30, 2020
- Series: Policy Papers
- DOI: https://doi.org/10.5089/9781513558080.007
Summary
- The adoption of the IV represented a major advance in the IMF’s policy framework to provide advice on capital account liberalization and the management of capital flows.
- Before the adoption of the IV, there was no consistent framework to guide policy advice on these areas.
- The IV welcomed the economic benefits of capital flows while recognizing the risks associated with capital flow volatility.
- The IV developed a playbook for safe capital account liberalization and incorporated capital flow management measures (CFMs) into the policy toolkit.
- The IV noted the importance of international cooperation on capital flow policies in allowing countries to harness the benefits of capital flows safely, while minimizing negative spillovers.
- The IV was a demonstration of the institution’s flexibility and willingness to embrace theoretical advances and lessons from experience.
Major findings and analysis
- Capital flows deliver economic benefits but carry risks from volatility; policy must balance these trade-offs.
- Prior to the IV, IMF advice lacked a consistent framework; the IV filled an institutional gap that existed at the time.
- The IV institutionalized CFMs as part of the policy toolkit for managing capital flow episodes.
- International cooperation is important for minimizing negative spillovers while enabling safe harnessing of capital flows.
Policy implications and recommendations
- Use the IV’s playbook for safe capital account liberalization when advising countries on liberalization sequencing and safeguards.
- Incorporate CFMs, where appropriate, into policy toolkits alongside other macroeconomic and prudential policies.
- Emphasize international cooperation on capital flow policies to manage cross-border spillovers and support safe integration with global capital markets.
- Continue to adapt IMF policy advice by embracing theoretical advances and lessons from country experience.
Statement by the Managing Director on the Independent Evaluation Office Report on IMF Advice on Capital Flows, Executive Board Meeting September 18, 2020 (September 30, 2020).
Content in this bundle
- Policy Paper