IMF Occasional Paper No. 210

• Pages: 4-

Page 4

IMF-Supported Programs in Capital Account Crises

Atish Ghosh, Timothy Lane, Marianne Schulze-Ghattas, Ales Bulír , Javier Hamann, and Alex Mourmouras

During the 1990s, a number of emerging market countries faced "capital account" crises, in which sudden reversals of capital inflows, reflecting shifts in market sentiment, forced abrupt current account adjustments, often with pervasive macroeconomic consequences. Although concerns about the sustainability of external policies played a role in crisis propagation, it does not explain the magnitude of the adjustments. Other vulnerabilities, such as public debt dynamics, a risky public debt management strategy, or pervasive financial sector weaknesses were critical in changing investor confidence. The paper discusses three main issues. First, did the IMF- supported program's design adequately take into account what was distinctive about these crises? Second, can macroeconomic policies influence the...