IMF Helps Promote Understanding of Capital Flows

Seminar aids understanding of capital flows management

Participants hear of varied country experiences of capital flows

Gathering reflects increasing regional economic cooperation

The two-day event on “Managing Capital Flows: What Worked, and Why” is one of a series of initiatives aimed at promoting economic cooperation in the region.

The gathering, which took place in March 2013, was opened by Tatsuo Yamasaki, Director General of the International Bureau of the Japanese Ministry of Finance and OAP’s Director Shogo Ishii. Participants included government officials from thirteen Asian countries as well as scholars from the Japan-IMF Scholarship Program for Asia (JISPA) who attended as observers.

JISAP provides support for promising government officials with the potential to become macroeconomic managers of their country.

Recent trends in capital flows

Opening the discussion, Giovanni Ganelli of the IMF’s Regional Office for Asia and the Pacific outlined the global trends and determinants of capital flows to emerging markets.

He said global “push” factors and country-specific “pull” factors influenced the volume and distribution of capital flows, adding that the former often affected the overall magnitude and timing of flows, and the latter their allocation between countries.

Former Chief Strategy Officer of the Thai Stock Exchange, Veerathai Santiprabhob, said he expected net inflows to emerging Asia to continue into the near future given global monetary easing, increasing risk appetite among foreign investors, and strong economic performance in the region.

“The challenges posed by continued inflows require coordinated policy responses, and central banks should not be left alone to manage them,” said Santiprabhob.

The Asian experience of capital flows

Seminar participants discussed the experiences and the policies of selected Asian countries in dealing with capital flows, including the minimum holding period on central bank paper introduced in Indonesia in 2010, the use of unremunerated reserve requirements in Thailand in 2006-2008, macro prudential measures to limit banks’ foreign exchange liquidity risks introduced in Korea in 2010-11, and the policy of non-internationalization for the ringgit pursued by Malaysia since the late 1990s.

Seminar participants also discussed the IMF’s view of capital flows. Marshall Mills of the IMF’s Strategy, Policy and Review department said the Fund recognized that capital flows have both benefits...