Capital Inflows in the Baltic Countries, Russia, and Other Countries of the Former Soviet Union: Monetary and Prudential Issues

IMF Working Papers, February 1, 1996

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Significant capital inflows were observed during the first half of 1995 in a number of FSU countries.
The paper reviews the recent experience of those countries with significant inflows, examines policy responses in view of the current macroeconomic and institutional environment, discusses the use of monetary and prudential instruments to sterilize or discourage inflows, and reviews operational considerations for conducting sterilization operations.

Review of country experiences with significant capital inflows in the first half of 1995.
Examination of policy responses given prevailing macroeconomic and institutional environments in affected FSU countries.
Discussion of monetary and prudential instruments to:
- sterilize inflows, and
- discourage inflows.
Review of operational considerations for conducting sterilization operations.

Subjects: Balance of payments, Banking, Capital inflows, Central banks, Inflation, Monetary base, Monetary policy, Money, Prices, Reserve requirements, Sterilization
Keywords: Baltics, bank, Capital inflows, cost, financial situation, FSU, FSU country, Inflation, market, market liquidity, Monetary base, monetary policy, nominal exchange rate, Reserve requirements, Sterilization, sterilization instrument, WP

Use of monetary instruments to sterilize or discourage capital inflows.
Use of prudential instruments to address financial stability concerns associated with inflows.
Operational design considerations for implementing sterilization operations.