## Managing the Tide: How Do Emerging Markets Respond to Capital Flows?

_IMF Working Papers, March 27, 2017_

## Source details

**Canonical URL:** [Managing the Tide: How Do Emerging Markets Respond to Capital Flows?](https://www.imf.org/en/publications/wp/issues/2017/03/27/managing-the-tide-how-do-emerging-markets-respond-to-capital-flows-44766)

## Other formats

- [Markdown version](/en/publications/wp/issues/2017/03/27/managing-the-tide-how-do-emerging-markets-respond-to-capital-flows-44766/index.md)
- [Structured JSON version](/en/publications/wp/issues/2017/03/27/managing-the-tide-how-do-emerging-markets-respond-to-capital-flows-44766/index.json)
- [Bundle manifest](/en/publications/wp/issues/2017/03/27/managing-the-tide-how-do-emerging-markets-respond-to-capital-flows-44766/bundle-manifest.json)

## Bibliographic details
- Authors: Atish R. Ghosh, Jonathan David Ostry, Mahvash S Qureshi
- Published: March 27, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475589207.001

---

### Key findings
- Sample: about 50 emerging market economies (EMEs) over 2005Q1–2013Q4.
- EMEs respond proactively to capital inflows by using a combination of policy tools.
- Policy toolkit deployed in response to inflows includes:
  - Central banks raise the policy interest rate to address economic overheating concerns.
  - Intervention in the foreign exchange market to resist currency appreciation pressures.
  - Tightening of macroprudential measures to dampen credit growth.
  - Deployment of capital inflow controls in the face of competitiveness and financial-stability concerns.
- No evidence found of counter-cyclical fiscal policy in the face of capital inflows, contrary to conventional policy advice to EMEs.
- Policies are more likely to respond, and to be used in combination, during inflow surges than in more normal times.

### Method and scope
- Type: IMF Working Paper.
- Authors: Atish R. Ghosh; Jonathan David Ostry; Mahvash S Qureshi.
- Publication date: March 27, 2017.
- Coverage period: 2005Q1–2013Q4.
- Sample size: about 50 EMEs.
- Length: 41 pages.
- Series and identifiers:
  - Working Paper No. 2017/069
  - Issue: 069
  - DOI: https://doi.org/10.5089/9781475589207.001
  - ISBN: 9781475589207
  - ISSN: 1018-5941
  - Stock No: WPIEA2017069

### Subject areas and keywords
- Subject: Balance of payments; Capital controls; Capital flows; Capital inflows; Central bank policy rate; Financial services; Foreign exchange; Output gap; Production.
- Keywords: capital control; capital controls; capital flow; capital flows; Capital inflows; Central bank policy rate; emerging market economies; exchange rate; FX intervention; Global; inflow control; outflow control; Output gap; policy toolkit; prudential measure; WP

### Policy implications and interpretation
- Monetary policy: Raising policy interest rates is a common EME response to curb overheating associated with capital inflows.
- FX policy: Foreign exchange intervention is used to resist appreciation pressures that accompany inflows.
- Macroprudential policy: Authorities tighten prudential measures to temper credit expansion driven by inflows.
- Capital flow management: Capital inflow controls are applied when competitiveness or financial-stability concerns arise.
- Fiscal policy: EMEs did not exhibit counter-cyclical fiscal responses to capital inflows in the study period.
- Coordination and sequencing: Policymakers are more likely to combine tools and to act decisively during inflow surges compared with normal times.

*IMF Working Paper: Atish R. Ghosh; Jonathan David Ostry; Mahvash S Qureshi. "Managing the Tide: How Do Emerging Markets Respond to Capital Flows?", March 27, 2017, Working Paper No. 2017/069.*

---

## Content in this bundle

- **Managing the Tide: How Do Emerging Markets Respond to Capital Flows?, WP/17/69, March 2017**
  - [Managing the Tide: How Do Emerging Markets Respond to Capital Flows?, WP/17/69, March 2017 (Markdown version)](/-/media/files/publications/wp/2017/wp1769.pdf.md){rel="alternate" type="text/markdown"}
  - [Managing the Tide: How Do Emerging Markets Respond to Capital Flows?, WP/17/69, March 2017 (PDF)](/-/media/files/publications/wp/2017/wp1769.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2017/03/27/managing-the-tide-how-do-emerging-markets-respond-to-capital-flows-44766_