Implications of a Surge in Capital Inflows: Available tools and Consequences for the Conduct of Monetary Policy

May 1, 1996

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Format: Chicago

Jang-Yung Lee. Implications of a Surge in Capital Inflows: Available tools and Consequences for the Conduct of Monetary Policy, (USA: International Monetary Fund, 1996) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper seeks to extend discussion of monetary policy instruments to the situation of a country faced with major capital inflows when the process of domestic financial liberalization is incomplete. It briefly summarizes the recent usage of traditional monetary instruments, discusses the practical limits to classic sterilization measures as well as the pros and cons of using other supplementary measures including tax-based controls on capital inflows. It also examines the efficacy of such measures in Chile, Colombia, Indonesia, Korea, Spain, and Thailand. The conclusion is that, for a time and as a transitional measure, a country may find it opportune to supplement the traditional instruments with certain “belt and braces” measures including, in some instances, indirect (tax-based) capital controls.

Subject: Balance of payments, Capital controls, Capital flows, Capital inflows, Central banks, Open market operations, Sterilization

Keywords: Adjustable peg, Capital control, Capital controls, Capital flows, Capital inflows, Central bank bank paper, Cost of capital, Discount policy, Europe, Foreign exchange, Forward exchange market, Forward market, Market intervention, Market rate, Market rate of interest, Monetary policy, National interest, National interest rate differential, Open market operations, Rate of interest, Rate of return, Sterilization, Swap contract, Swap market, WP

Publication Details

Pages:

66
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1996/053
Stock No:

WPIEA0531996
ISBN:

9781451847345
ISSN:

1018-5941

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