Shocks Matter: Managing Capital Flows with Multiple Instruments in Emerging Economies

Released on by Mr.Ruy Lama
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  • Shocks Matter: Managing Capital Flows with Multiple Instruments in Emerging Economies Book Detail

  • Author : Mr.Ruy Lama
  • Release Date : 2020-06-19
  • Publisher : International Monetary Fund
  • Genre : Business & Economics
  • Pages : 44
  • ISBN 13 : 151354568X
  • File Size : 67,67 MB
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Shocks Matter: Managing Capital Flows with Multiple Instruments in Emerging Economies by Mr.Ruy Lama PDF Summary

Book Description: 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.

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Managing Capital Flows and Exchange Rates

Managing Capital Flows and Exchange Rates

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"This is a very timely book that brings the reader to the forefront of current research on macroeconomic policy issues in economies subject to sizable capital f