IMF高級宏觀經濟學研修班CT1405 MMF - L08 Managing International Capital Flows - Part II (RBrooks)

1、PresenterRay BrooksJoint China-IMF Training ProgramCourse on Macroeconomic Management and Financial Sector IssuesCT 14.01This training material is the property of the International Monetary Fund (IMF) and is intended for use in IMF Institute courses. Any reuse requires the permission of the IMF Inst

2、itute.Outline What was the experience with capital flows? How were capital flows managed in the past? Were capital controls effective? What will happen to with capital flows with liberalization? Experience of liberalization in other countries Benefits and risks of opening the capital account in Chin

3、a Steps toward successful liberalization in ChinaChinas Experience: Forex inflows were sizable, but mainly from the current account surplus.-4.0-2.00.02.04.06.08.010.012.014.0199019921994199619982000200220042006200820102012As percent of GDPChina: Current Account and Overall Balance of Payments (as p

4、ercent of GDP)Current Account BalanceOverall BalanceSources: International Financial Statistics databasethe capital and financial account was also in surplus and volatile.-1.00.01.02.03.04.05.06.0199019921994199619982000200220042006200820102012As percent of GDPChina: Capital and Financial Balance (a

5、s percent of GDP)Capital and Fianancial A/CSources: International Financial Statistics databaseFDI flows were largeFDI and other Capital Flows were large in a global context tooGross Capital Flows were also largeHow were capital flows managed in the past? A combination of policies managed the flows:

6、 Exchange rate policy (gradual appreciation) Sterilization of forex inflows Reserve requirements on banks Capital controls Improved prudential and supervisory policiesNominal and Real Effective Exchange Rates appreciated since 2005 reform809010011012013014080901001101201301401998Q42000Q42002Q42004Q4

7、2006Q42008Q42010Q42012Q4Nominal Effective Exchange Rate and Real Effective Exchange Rate (Index, 2005=100)Nominal Effective Exchange RateReal Effective Exchange RateSources: International Financial Statistics databaseSterilization: Official Reserves increased considerably0.010.020.030.040.050.060.00

8、.02.04.06.08.010.012.014.0199019921994199619982000200220042006200820102012China: Overall Balance of Payments and Official Reserves (as percent of GDP)Overall Balance (LHS)Official Reserves (RHS)Sources: International Financial Statistics databaseWith considerable variation in the extent of forex int

9、erventionThe reserve requirement on banks was increased to manage the liquidity impact of forex inflowsCapital Account controls were eased in past decade but remain restrictiveChina remains relatively closedWere capital controls effective? Flows do not appear sensitive to interest rate differentialF

10、ranziska Ohnsorge and Steven Barnett, IMF March, 2013But sensitive to US interest rateFranziska Ohnsorge and Steven Barnett, IMF 2013What will happen to capital flowswith liberalization?What happened in other countries? 20+ episodes of capital account liberalization (Kaminsky and Schmukler, 2003) in

11、 AM and EM since 1979. The increase in net capital inflows from the year before to the year after liberalization depended on: State of domestic versus world business cycle Time since financial sector liberalizationGross international assets and liabilities increased on average by 19-20 percentage po

12、ints of GDP over the following five years. Portfolio inflows increased and.Bayoumi and Ohnsorge, IMF WP 2013 as did other investment flows. Bayoumi and Ohnsorge, IMF WP 2013Capital account liberalization was almost always followed by increases in gross foreign assetsBayoumi and Ohnsorge, IMF WP 2013

13、.and often also increases in gross foreign liabilities.Bayoumi and Ohnsorge, IMF WP 2013Recent IMF study predicts rise in Chinese assets with liberalization of capital accountBayoumi and Ohnsorge, IMF WP 2013Experience of other countries: liberalization often followed by exchange rate or banking cri

14、sisBayoumi and Ohnsorge, IMF WP 2013Some country casesKorea: liberated capital controls before exchange liberalization: led to currency mismatches on balance sheets and 1997 crisisIsrael: Unsuccessful “big bang” liberalization in 1977, large inflows that reversed. Controls reintroduced 1 years later

15、. Subsequent reform better managed. Sweden: capital account liberalization in 1989 and financial liberalization led to credit boom. Could not defend fixed exchange rate. Turkey: capital account liberalization with fiscal dominance: destabilizing capital flows and two crises (1994 and 2001). Emerging

16、 markets with more flexible exchange rates have generally fared better in face of external pressures (Chile, Peru, South Africa)Benefits of opening the capital account in China Better allocation of capital and risk diversification Wider use of RMB as international currency Would help rebalance growt

17、h away from reliance on exports and investment, with supporting financial and exchange rate reforms Would facilitates financial sector reform and development by: Improving liquidity in domestic equity markets Introducting competition Banking sector, with foreign bank entry bringing benefits to saver

18、s and borrowers Insurance sector currently protected, would face greater competition Capital controls less effective over time in face of expanded trade and more sophisticated investorsRisks of opening the capital account in China Gross capital flows could be large after liberalization Potential pro

19、blems: Asset bubbles Capital flight Currency and maturity mismatches in bank and corporate balance sheets Problems could lead to crisis as seen in other countries Underlines need for cautious and integrated approach to liberalization, with accompanying reforms Steps toward successful Capital Account

20、 Liberalization (IMF A4 2012) Aim to harness benefits of open capital flows while mitigating the risks. Sequencing importantbut plans should be flexible and tuned to changing circumstances Some prerequisites: Exchange rate reformgreater flexibility would reduce capital flows and allow for independen

21、t monetary policy New monetary frameworkobjectives of growth, inflation and financial stability Regulation and supervisionimprove supervision, regulation, and risk monitoringSteps toward Capital Account Liberalization cont. Interest rate liberalizationmove to market-determined loan and deposit rates should not involve loosening of monetary policy Full liberalization, esp. short-ter