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Regulating Capital Flows at Both Ends
Report

Regulating Capital Flows at Both Ends

Does it Work?

Atish R. Ghosh, Mahvash S. Qureshi and Naotaka Sugawara
IMF, 2014
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Editorial Rating

8

Qualities

  • Innovative

Recommendation

Emerging markets must master a difficult balancing act: While they need adequate investment for development, sequential floods and droughts of cash can destabilize their economies when financial waves shift. Attempts to use capital controls to smooth the flow has rendered mixed results, as aspirations have collided with institutional weaknesses in many countries. Is there a better way? getAbstract recommends this scholarly report from Atish R. Ghosh, Mahvash S. Qureshi and Naotaka Sugawara, economists at the International Monetary Fund, for its comprehensive analysis of the efficacy of capital controls and its case for multilateral cooperation in the management of financial flows.

Take-Aways

  • Countries receiving large, volatile capital inflows are at risk of currency disruptions, overheated economies and financial crises if the flow of money abruptly reverses.
  • Capital exporting countries generally see less risk in outflows, but their stimulative monetary policies can become less effective, and they can suffer from the economic contagion of recipient nations’ instability.
  • Research shows that comparable increases in capital controls in both source and recipient nations slash flows by 63%.

About the Authors

Atish R. Ghosh, Mahvash S. Qureshi and Naotaka Sugawara are economists at the International Monetary Fund.

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