Maintaining macroeconomic and financial stability «2 out of 2»

The institutional view has indicated that it may be appropriate to use capital inflows for a limited period of time to limit inflows, when a rise in capital inflows leads to a reduction in policy space to address currency overvaluation and economic overheating. She also mentioned that it can be useful to use capital flow management measures to limit outflows, when disruptive capital outflows threaten to create a crisis.
The corporate view has seen capital flow management / macro pudential inflow management measures only during a boom in capital flows, assuming that financial stability risks arising from inflows would arise mainly in that context.
At the time of the adoption of the institutional vision, the Fund recognized that it would develop on the basis of research and experience.
The review includes an update of the corporate vision, while preserving the basics on which it is based. The audit also maintains current advice on capital liberalization, and the use of capital inflow management / macro pudential management measures in periods of disruptive outflow.
The most important update is the addition of appropriate preventative capital inflows / macropudential management measures to the policy toolkit, even when there is no capital inflow surge.
This change builds on the IPF, a research effort by the Fund to build a systematic framework on which policy options and trade-offs can be analyzed in the light of each country’s specificities.
The integrated policy framework and other research on external crises have brought new dimensions to the management of financial stability risks arising from capital flows, emphasizing that risks to financial stability may arise from the gradual build-up of foreign debt denominated in foreign currencies, even without a surge in flow Dakhla. In limited and exceptional cases, this research has also shed light on the risks arising from external debt denominated in local currency.
In addition, there may be difficulties in addressing these risks due to the changing nature of global financial intermediation outside the banking system. Macropudential measures alone may in no case contain risks such as those arising from foreign currency lending by non-financial corporations and shadow banks.
Capital flow management / macro-prudential management measures aimed at limiting outflows can mitigate the risks arising from external debt. However, they should not be used in a way that leads to excessive distortions. Nor should it be seen as a substitute for necessary macroeconomic and structural policies or used to maintain highly weak currencies.
An important update of the corporate vision is the special treatment of some categories of capital flow management measures. These measures will not inform the policy advice of the Institutional Vision, because they are subject to separate international frameworks for global policy coordination, or because they are applied for specific non-economic considerations.
The categories of capital flow management measures covered by special treatment include specific macro-prudential measures in accordance with the Basel Framework, tax measures based on specific standards for international cooperation in the fight against tax fraud or evasion, measures applied comply with international standards for the control of money. money laundering and terrorist financing, and measures applied for reasons related to national and international security.
In addition, the review explains how to use the integrated policy framework as a guideline for the basic provisions needed under the institutional vision, such as those related to the nature of shocks and related market deficits in the necessary macroeconomic adjustments.
The review also provides practical guidance for policy advice on capital flow management measures, including how to identify increases in capital inflows, how to determine whether it is too early to liberalize capital inflows, and what capital inflow management measures are important. Make it worthwhile to focus on the work of supervision.
The Fund strives to learn more and constantly adapt to developments to provide the best service to its member countries. Similar to other Fund Policies, the corporate vision will continue to be guided by research achievements, as well as by developments in the global economy, and the experiences of member countries. The review broadened the range of policy instruments available to policymakers, particularly in emerging and developing countries, while preserving the key tenets of the original institutional vision.
Our goal is for countries to be able to use these updated instruments to maintain macroeconomic and financial stability while continuing to reap the benefits of capital flows.

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