Managing Capital Flows: Macroeconomic Analysis and Policies (MCF)

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Aim: Foster understanding of the dynamics of capital flows and their effects on economic growth, macroeconomic volatility, and risk of crisis.
Core topics covered sequentially:
- Refresher on balance of payments statistics and description of alternative measures of capital flows and financial (capital) account openness.
- Determinants of capital flows and the link between these flows and economic growth, macroeconomic volatility, and crisis risk.
- Sequencing capital account liberalization to reap benefits of capital market integration while minimizing and mitigating adverse effects.
- Analytical methods and data sources for the analysis and forecasting of capital flows.
- Discussion of the IMF's Institutional View on capital flows and its relation to macroeconomic policy, macroprudential measures, capital flow management tools, and exchange rate intervention.
Duration: This two-week course is devoted to the above topics.

Target audience:
- Junior to mid-level policy makers in central banks and finance ministries with policy responsibilities related to capital flow management and liberalization.
Qualifications:
- Participants are expected to have an advanced degree in economics or equivalent experience, good quantitative skills, and a basic knowledge of Microsoft Excel.
Pre-requisites:
- Not applicable.

Identify the financial and economic risks that a global capital market creates for both small and large economies.
Understand the appropriate sequencing of capital account liberalization and associated reforms.
Identify how policy actions can influence or prevent the occurrence of capital account crises.
Evaluate the impact of financial reform policies on both economic growth and the risk of financial crisis.
Understand the key features of the IMF's Institutional View, and the use of macroeconomic policies, macroprudential measures and capital flow management tools.
Propose policy actions to address or avoid future crises and reduce their costs.

The course discusses policy options available to reap the benefits of capital market integration while minimizing and mitigating adverse consequences.
Topics to be covered include:
- The benefits and costs of financial integration.
- The capital inflow problem.
- Models of currency crises and sudden stops of capital inflows.
Emphasis on analytical methods and data sources for analysis and forecasting of capital flows.

Use of case studies of actual crises to show how policy setting and failure to recognize and address buildup of vulnerabilities led to crisis.
Workshops and case studies are important components to allow participants to grasp concepts and to take advantage of instructors' experience.
Participants are expected to engage in discussions and work on practical workshop exercises to solidify understanding of lecture material.