A Modernized Approach to Managing the Risks in Cross-Border Capital Movements

IMF Policy Discussion Papers, July 1, 1999

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A Modernized Approach to Managing the Risks in Cross-Border Capital Movements

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Bibliographic details

• Authors: Inci Ötker, R. B. Johnston
• Published: July 1, 1999
• Series: IMF Policy Discussion Papers
• DOI: https://doi.org/10.5089/9781451972092.003

Summary and purpose

• Outlines a “modern” approach to managing risks in cross-border capital movements that is consistent with an environment of increased and liberalized capital flows.
• Emphasizes reducing the potential size of shocks associated with capital movements and increasing the resilience of the financial system to such shocks.
• States the approach is expected, over time, to reduce the need for recourse to capital controls.

Key elements of the modern approach

• A consistent monetary and exchange rate policy mix to avoid incentives for volatile capital flows.
• Prudential management of the specific risks in capital flows.
• Supporting financial sector reforms.
• Appropriate sequencing of liberalization.

Expected outcomes

• Reduction in the potential size of shocks associated with capital movements.
• Increased resilience of the financial system when shocks occur.
• Gradual reduction in the need to use capital controls.

Subjects and keywords

• Subject: Balance of payments; Capital controls; Capital flows; Exchange rate flexibility; Exchange rate policy; Exchange rates; Foreign exchange
• Keywords: capital; Capital controls; Capital flows; capital mobility; consistency of policy mix; control; Cross-border capital movements; exchange rate; Exchange rate flexibility; Exchange rate policy; Exchange rates; Global; interest rate; managed exchange rate arrangement; PDP; policy consistency; policy mix; prudential risk management; rates of return on asset; risk; risk exposure; risk weight; time consistency of exchange rate policy

Content in this bundle

• A Modernized Appoach to Managing the Risks in Cross-Border Capital Movements - PDP/99/6
  • A Modernized Appoach to Managing the Risks in Cross-Border Capital Movements - PDP/99/6 (Markdown version)
  • A Modernized Appoach to Managing the Risks in Cross-Border Capital Movements - PDP/99/6 (PDF)