Monetary Stability, Exchange Rate Regimes, And Capital Controls: What Have We Learned?(Report)
The Cato Journal, 2008, Spring-Summer, 28, 2
The Cato Journal
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Few topics in macroeconomics are as contentious as capital account liberalization and exchange rate regimes. This article attempts to briefly summarize what we have learned through the turbulent 1990s and the relatively benign 2000s. It is obviously not intended to review the massive literature on these topics, only to distill the main policy conclusions--or at least what I think are the main policy conclusions. In contrast to current account liberalization, which is enshrined in the Articles of Agreement, the International Monetary Fund has no explicit mandate to promote capital account liberalization. Even so, the IMF seeks to be a "center of excellence" in analyzing capital account issues, in light of the growing financial globalization and its implications for macro management in member countries. To deal with surges in capital inflows, the IMF has generally advocated tightening fiscal policy to prevent overheating and limit real appreciation (IMF 2007a). Such a policy response helps reduce the economy's vulnerability to a "hard landing" after the inflows abate. However, counter-cyclical fiscal policy is no panacea, because governments may be unable to change the fiscal stance to the extent and at the speed required to offset the impact of shifts in capital inflows.
- 2,99 €
- Category: Politics & Current Affairs
- Published: 22 March 2008
- Publisher: Cato Institute
- Print Length: 13 Pages
- Language: English