Chapter 3 Managing Large Capital Inflows
- International Monetary Fund. Research Dept.
- Published Date:
- April 2007
This chapter examines the policy responses to surges in private capital inflows in a group of emerging market countries and open advanced economies over the past two decades. The results suggest that fiscal restraint during periods of large capital inflows can help limit real currency appreciation and foster better growth outcomes in the aftermath of such episodes. Resisting nominal exchange rate appreciation through sterilized intervention is likely to be ineffective when the influx of capital is persistent. Tightening capital controls does not appear to deliver better outcomes.