Regulating capital flows in emerging markets: the IMF and the Global Financial Crisis
Gallagher, Kevin P.
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In the wake of the financial crisis the International Monetary Fund (IMF) began to publicly express support for what have traditionally been referred to as ‘capital controls’. In addition to public statements, the IMF underwent a systematic re-‐ evaluation of Fund policy on the matter, and published an official view on the economics of capital flows. In this view the IMF concluded that capital account liberalization is not always the most optimal policy and that there are situations where capital controls—rebranded as ‘capital flow management measures’—are appropriate. This paper empirically examines the extent to which the change in IMF discourse on these matters has resulted in significant changes in IMF policy advice. To answer this question we create a database of IMF Article IV reports and examine whether the financial crisis had an independent impact on IMF support for capital controls. We find that the IMF’s level of support for capital controls has increased as a result of the crisis and as the vulnerabilities associated with capital flows accentuate.
This repository item contains a working paper from the Boston University Global Economic Governance Initiative. The Global Economic Governance Initiative (GEGI) is a research program of the Center for Finance, Law & Policy, the Frederick S. Pardee Center for the Study of the Longer-Range Future, and the Frederick S. Pardee School of Global Studies. It was founded in 2008 to advance policy-relevant knowledge about governance for financial stability, human development, and the environment.