Policy Papers

Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Principles for the Design of Measures to Address Systemic Risks from FX Mismatches

Author/Editor:

Heedon Kang ; Paavo A Miettinen ; Erlend Nier ; Thorvardur Tjoervi Olafsson ; Gurnain Kaur Pasricha

Publication Date:

March 30, 2022

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

This note describes the key principles for the design and implementation of preemptive CFM/MPMs. These measures should be designed to be effective—so they achieve their intended goal and are not easily circumvented—and efficient—so they minimize distortions and costs. Preemptive CFM/MPMs should be targeted, calibrated to risks, transparent, and as temporary as possible. The appropriate design depends on country circumstances, such as institutional and legal constraints, as well as the precise source of the vulnerability. Where measures that do not discriminate by residency are available and effective, they should be preferred.

Series:

Policy Paper No. 2022/011

Subject:

Balance of payments Capital flow management Financial sector policy and analysis Foreign exchange Monetary policy Political economy Systemic risk

Frequency:

occasional