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Article: Policy responses.(Capital Inflows to Developing and Transition Countries - Identifying Causes and Formulating Appropriate Policy Responses)
- Article from:
- World Economic Outlook
- Article date:
- October 1, 1996
CopyrightCOPYRIGHT 1996 International Monetary Fund. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The appropriate policy response, besides depending on the causes of capital inflows, will also be affected by the degree of flexibility provided by the domestic institutional structure and by the existing policy stance.(4) Countries that pursue relatively balanced macroeconomic policies will clearly find it easier to fashion an appropriate policy response while those pursuing unbalanced policies - a common form of which is an excessively expansionary fiscal policy compensated by a tight monetary policy - will have greater difficulty in dealing with the disruptions caused by inflows.
For some countries, upward pressures on exchange rates arising from large capital ...