Coping with Capital Inflows: Experiences of Selected European Countries
IMF Working Papers, July 1, 2007
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- Coping with Capital Inflows: Experiences of Selected European Countries
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Bibliographic details
- Authors: David Vávra, Inci Ötker, Barry Topf, Zbigniew Polanski
- Published: July 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451867541.001
Summary
- This paper reviews the experiences of a number of European countries in coping with capital inflows.
- It describes the nature of the inflows, their implications for macroeconomic and financial stability, and the policy responses used to cope with them.
- The experiences suggest that as countries become more integrated with international financial markets, there is little room to regulate capital flows effectively.
Main findings
- Deepening financial markets, strengthening financial system supervision and regulation (where needed), and improving the capacity to design and implement sound macroeconomic and financial sector policies are identified as the most effective ways to deal with capital inflows.
- These actions will help increase the absorption capacity and resilience of the economies and financial systems to the risks associated with the inflows.
Policy implications and recommendations
- Deepen financial markets to better absorb and intermediate capital inflows.
- Strengthen financial system supervision and regulation where needed.
- Improve capacity to design and implement sound macroeconomic and financial sector policies to enhance resilience to inflow-related risks.
Subjects and keywords
- Subject: Capital inflows, Exchange rate flexibility, Exchange rates, Foreign exchange, Inflation targeting
- Keywords: country, debt management, exchange rate, monetary policy, regime vulnerability, WP, yes