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International Monetary Fund. Monetary and Capital Markets Department

Abstract

The Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER) has been published by the IMF since 1950. It is a unique publication based on a database maintained by the IMF that tracks exchange arrangements and foreign exchange systems for all member countries on an annual basis and also provides historical information on these. The introduction to the volume provides a summary of recent global trends and developments in the areas covered by the publication. Individual country chapters report exchange measures in place, the structure and setting of the exchange rate, arrangements for payments and receipts, procedures for resident and nonresident accounts, mechanisms for import and export payments and receipts, controls on capital transactions, and provisions specific to the financial sector. A separate section in each chapter lists changes made during 2005 and the first part of 2006. The AREAER draws on information made available to the IMF from a number of sources, including during official staff visits to member countries, and has been prepared in close consultation with national authorities. The information is presented in a tabular format.

Mr. Akira Ariyoshi, Mr. Andrei A Kirilenko, Ms. Inci Ötker, Mr. Bernard J Laurens, Mr. Jorge I Canales Kriljenko, and Mr. Karl F Habermeier

Abstract

This paper examines country experiences with the use and liberalization of capital controls to develop a deeper understanding of the role of capital controls in coping with volatile capital flows, as well as the issues surrounding their liberalization. Detailed analyses of country cases aim to shed light on the motivations to limit capital flows; the role the controls may have played in coping with particular situations, including in financial crises and in limiting short-term inflows; the nature and design of the controls; and their effectivenes and potential costs. The paper also examines the link between prudential policies and capital controls and illstrates the ways in which better prudential practices and accelerated financial reforms could address the risks in cross-border capital transactions.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

For the first time since the October 2008 Global Financial Stability Report, risks to global financial stability have increased (Figures 1.2 and 1.3), signaling a partial reversal in progress made over the past three years. The pace of the economic recovery has slowed, stalling progress in balance sheet repair in many advanced economies. Sovereign stress in the euro area has spilled over to banking systems, pushing up credit and market risks. Low interest rates could lead to excesses as the “search for yield” exacerbates the turn in the credit cycle, especially in emerging markets. Recent market turmoil suggests that investors are losing patience with the lack of momentum on financial repair and reform (Box 1.1). Policymakers need to accelerate actions to address longstanding financial weaknesses to ensure stability.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

The asset allocation decisions of investors are at the core of financial flows between markets, currencies, and countries. This chapter aims to identify the fundamental drivers for these decisions and determine whether their influence has been altered by the global financial crisis and the subsequent low interest rate environment in advanced economies. In particular, the chapter investigates whether changes in investor behavior pose downside risks for global financial stability.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

Operationalizing macroprudential policies requires progress on a number of fronts: developing ways to monitor a risk buildup, choosing indicators to detect when risks are about to materialize, and designing and using macroprudential policy tools. Establishing these robust frameworks will be a lengthy process. Using a structural model and empirical evidence, the following analysis takes a solid step forward on each of the interrelated tasks.

Donald J. Mathieson and Jorge E. Roldos

Abstract

The development of local securities and derivatives markets is just one response of many emerging markets to global volatility since the mid-1990s, particularly the sudden losses of access to international capital markets and periods of high global asset price volatility. This chapter analyzes key policy issues related to the role of these markets as an alternative source of funding for sovereign and corporate entities and a means of attracting foreign capital inflows. Subsequent chapters examine the development of local bond, equity, and derivatives markets in emerging markets.

Jorge E. Roldos

Abstract

A key policy prescription for fending off financial crises in emerging markets has been the development of local bond markets, and this strategy has been embraced by a number of policymakers and international organizations (see World Bank and IMF, 2001). From a macro-economic perspective, local bond markets could soften the impact of lost access to international capital markets or bank credit by providing an alternative source of funding.40 From a microeconomic perspective, they could help create a wider menu of instruments to deal with inherent currency and maturity mismatches in emerging markets (see Eichengreen and Hausmann, 1999: and HKMA, 2001).