## The Institutional View on Liberalization and Management of Capital Flows

## Source details

**Canonical URL:** [The Institutional View on Liberalization and Management of Capital Flows](https://www.imf.org/en/topics/capital-flows)

## Other formats

- [Markdown version](/en/topics/capital-flows/index.md)
- [Structured JSON version](/en/topics/capital-flows/index.json)
- [Bundle manifest](/en/topics/capital-flows/bundle-manifest.json)

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### Background and purpose
- The IMF first adopted the Institutional View in 2012 to provide a balanced and consistent approach to capital account liberalization and capital flow management at a time when many emerging markets faced large and volatile capital flows.
- The framework recognizes that capital flows are desirable because they can bring substantial benefits to recipient countries, while also posing macroeconomic challenges and financial stability risks.

### Core principles and scope
- Capital flows deliver substantial benefits to recipient countries but can create macroeconomic and financial stability risks.
- The framework permits the limited use of capital flow management measures (CFMs), some of which may also be macroprudential measures (MPMs), collectively referred to as CFM/MPMs.
- The 2012 Institutional View incorporated measures to restrict capital flows in a limited manner where appropriate.

### 2022 Review — key expansion
- The 2022 Review updates the 2012 Institutional View using advances in research and policy experience.
- The Review expands policymakers’ toolkit by allowing the pre-emptive use of CFM/MPMs on inflows in the presence of stock vulnerabilities that threaten economic and financial stability, including when there is no capital inflow surge.

### Analytical underpinnings and risk assessment
- Assessing systemic financial stability risks due to FX mismatches provides the analytical rationale for the preemptive use of CFM/MPMs.
- The assessment framework illustrates:
  - Sources of systemic risks from FX mismatches.
  - An approach to assess such risks.
  - Examples of relevant information and tools for evaluation.

### Design principles for preemptive measures
- Preemptive CFM/MPMs should be:
  - Targeted.
  - Calibrated to risks.
  - Transparent.
  - As temporary as possible.
- Appropriate design of measures depends on country circumstances.

### Policy guidance and toolkit use
- Insights from the IPF Analytical Toolkit can guide the appropriate policy mix during an inflow surge, tailored to the nature of the shock and country characteristics.
- The Review and supporting analysis expand the range of policy options available to support countries in reaping benefits from capital flows while managing associated risks to economic and financial stability.

---


## References

- [Paper](https://www.imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/The-Liberalization-and-Management-of-Capital-Flows-An-Institutional-View-PP4720)
- [PR](https://www.imf.org/en/News/Articles/2022/03/30/pr2297-executive-board-concludes-the-review-of-the-institutional-view-on-capital-flows)
- [Review of the Institutional View on the Liberalization and Management of Capital Flows](https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/03/29/Review-of-The-Institutional-View-on-The-Liberalization-and-Management-of-Capital-Flows-515883)
- [Capital Flows and Capital Flow Management Measures—Benefits and Costs](https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/03/29/Review-of-The-Institutional-View-on-The-Liberalization-and-Management-of-Capital-Flows-515888)
- [Assessing Systemic Financial Stability Risks Due to FX Mismatches](https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/03/29/Review-of-The-Institutional-View-on-The-Liberalization-and-Management-of-Capital-Flows-515893)
- [Principles for the Design of Measures to Address Systemic Risks from FX Mismatches](https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/03/29/Review-of-The-Institutional-View-on-The-Liberalization-and-Management-of-Capital-Flows-515898)
- [Using the IPF Analytical Toolkit to Enhance Policy Assessments](https://www.imf.org/en/Publications/Policy-Papers/Issues/2022/03/29/Review-of-The-Institutional-View-on-The-Liberalization-and-Management-of-Capital-Flows-515903)
- [Related Papers](https://www.imf.org/en/Topics/Capital-Flows/Capital-Flows-Papers-Blogs)
- [Frequently Asked Questions](https://www.imf.org/en/About/FAQ/capital-flows)

_Source: https://www.imf.org/en/topics/capital-flows_