BIS paper proposes new capital flow management tool
Offsetting capital flows rather than blocking them could be the optimal choice, authors say
Policy-makers in emerging market economies (EMEs) may achieve better results by allowing volatile capital movements than by blocking them, if they can encourage domestic investors to counterbalance the flows, new research finds.
In the working paper, published by the Bank for International Settlements, Damiano Sandri and Olivier Jeanne outline a model in support of their novel approach to capital flow management. Their model features three periods: agents issue debt to foreign investors; there
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