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The new IMF approach to capital account management and its blind spots : Lessons from Brazil and South Korea

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  • The new IMF approach to capital account management and its blind spots
  • Fritz, Barbara; Prates, Daniela
  • desiguALdades.net


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Title The new IMF approach to capital account management and its blind spots
Similar Titles
Sub Title

Lessons from Brazil and South Korea

Material Type Articles
Author(English)

Fritz, Barbara; Prates, Daniela

Publisher

[Berlin]:desiguALdades.net

Date 2013
Series Title; No Working Paper Series / no. 35
Pages 46
Subject Country Brazil(Americas)
South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Holding German National Library

Abstract

As emerging economies experience a boom in capital inflows, governments are increasingly concerned about the downsides of these inflows. Even the IMF (International Monetary Fund), long a stalwart proponent of financial liberalization, is engaging in a new debate on capital flow management. Drawing lessons from empirical case studies on Brazil and South Korea, this paper finds that the new IMF approach remains insufficient in three key respects. First, the organization’s proposed distinction between measures, especially between permanent prudential regulation and temporary policies to shield the exchange rate, is unsustainable, especially in countries with highly sophisticated and internationally integrated financial markets. Second, country-specific factors matter. In the case of Brazil, the most important measures are those that directly address the specific institutions within its derivative market. Third, in order to provide sufficient policy space for emerging markets, the management of international capital flows, including the measures taken by advanced economies, should be permanent and bilateral.