One-Size-Fits-One: Tailor-Made Fiscal Responses to Capital Flows

IMF Working Papers, December 1, 2008

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This paper surveys policy responses in recent years to capital inflows in a diverse group of countries that are represented by the Netherlands at the IMF Executive Board.
Based on the findings from cross-country empirical literature, the paper distills some guiding principles for policy responses to excessive capital inflows, depending on country-specific circumstances and with a particular focus on fiscal policy.
The paper considers conventional macroeconomic and structural policy tools and also discusses the role of microfiscal policies in affecting the size and the composition of capital inflows.
While conditions in these countries have changed very recently, the policy principles remain salient.

Guiding principles for policy responses to excessive capital inflows depend on country-specific circumstances.
Fiscal policy is emphasized as a central dimension of tailor-made responses.
Microfiscal policies can affect both the size and the composition of capital inflows.
Cross-country empirical literature provides the basis for distilled policy guidance.

Policy responses should be tailored to country-specific circumstances rather than one-size-fits-all approaches.
Fiscal policy instruments are highlighted for their role in responding to capital inflows.
Conventional macroeconomic and structural policy tools remain relevant alongside microfiscal measures.
Attention to the composition of inflows (not just their size) is important for policy design.

One-Size-Fits-One: Tailor-Made Fiscal Responses to Capital Flows; Daria Zakharova; December 1, 2008
- One-Size-Fits-One: Tailor-Made Fiscal Responses to Capital Flows; Daria Zakharova; December 1, 2008 (Markdown version)
- One-Size-Fits-One: Tailor-Made Fiscal Responses to Capital Flows; Daria Zakharova; December 1, 2008 (PDF)