Capital Flows at Risk: Taming the Ebbs and Flows

R. Gaston Gelos (), Lucyna Gornicka, Robin Koepke, Ratna Sahay and Silvia Sgherri

No 2019/279, IMF Working Papers from International Monetary Fund

Abstract: The volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new framework to answer critical policy questions: What policies and policy frameworks are most effective in dampening sharp capital flow movements in response to global shocks? What are the near- versus medium-term trade-offs of different policies? We tackle these questions using a quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on current domestic structural characteristics, policies, and global financial conditions. This new approach allows policymakers to quantify capital flows risks and evaluate policy tools to mitigate them, thus building the foundation of a risk management framework for capital flows.

Keywords: WP; portfolio inflow; portfolio; capital flow; Capital flows; macroprudential policies; foreign-exchange intervention; capital controls; emerging markets; flow risk; Bbb yield; capital flow volatility; flows data; FX intervention; capital flows data; capital flow measure; risks to capital flow; flows to emerging markets; capital flow risk; capital withdrawal; Exchange rate arrangements; Capital flow management; Emerging and frontier financial markets; Global (search for similar items in EconPapers)
Pages: 44
Date: 2019-12-20
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (22)

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Related works:
Journal Article: Capital flows at risk: Taming the ebbs and flows (2022)
Working Paper: Capital Flows at Risk: Taming the Ebbs and Flows (2021)
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