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Shocks Matter : Managing Capital Flows with Multiple Instruments in Emerging Economies / Ruy Lama.

Author/Creator:
Lama, Ruy.
Publication:
Washington, D.C. : International Monetary Fund, 2020.
Format/Description:
Government document
Book
1 online resource (44 pages)
Series:
IMF eLibrary
IMF Working Papers; Working Paper ; No. 2020/097
IMF Working Papers
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Summary:
We study the optimal management of capital flows in a small open economy model with financial frictions and multiple policy instruments. The paper reports two main findings. First, both foreign exchange intervention (FXI) and macroprudential polices are tools complementary to the monetary policy rate that can largely reduce inflation and output volatility in a scenario of capital outflows. Second, the optimal policy mix depends on the underlying shock driving capital flows. FXI takes the leading role in response to foreign interest rate shocks, while macroprudential policy becomes the prominent tool for domestic risk shocks. These results highlight the importance of calibrating the use of multiple instruments according to the underlying shocks that induce shifts in capital flows.
Notes:
Part of the IMF eLibrary collection.
Description based on print version record.
Contributor:
Medina, Juan Pablo.
Other format:
Print Version: Lama, Ruy Shocks Matter: Managing Capital Flows with Multiple Instruments in Emerging Economies
ISBN:
151354568X :
9781513545684
ISSN:
1018-5941
Publisher Number:
10.5089/9781513545684.001 doi
Access Restriction:
Restricted for use by site license.