Shocks and Capital Flows

How have countries responded to the volatility of capital flows external shocks? When faced with these challenges, countries tend to respond with a mix of policies. This book highlights work by IMF staff to support the development of an integrated policy framework (IPF), which assessed patterns of policy responses and their effects, developed models that included realistic market imperfections, and allowed for an analysis of the simultaneous use of multiple policy tools. The aim of this research was to develop a more systematic understanding of interactions among the tools in an integrated policy framework--an approach that could jointly consider monetary, exchange rate, macroprudential, and capital flow management policies. This research would also provide countries with the necessary tools to respond to external shocks and the volatility of capital flows. The chapters in this book represent a collection of empirical studies, based on cross-county analyses, case studies, and a survey of institutional investors. Part I examines the experience of countries in dealing with volatile capital flows. Parts II, III, and IV focus on countries' experiences with specific policy choices: capital flow management measures, macroprudential policies, and foreign exchange interventions. The concluding section compares policies.