TARGET GROUP | Junior- to mid-level policymakers in central banks and finance ministries who have policy responsibilities related to capital account management. No prior knowledge of the material is required. Participants should have an advanced degree in economics or equivalent experience, good quantitative skills, and a basic knowledge of Excel. It is recommended that participants have taken either the Financial Programming and Policies (FPP) or the Macroeconomic Diagnostics (MDS) course.
DESCRIPTION | This two-week course, presented by the IMF’s Institute for Capacity Development, is devoted to fostering the understanding of the dynamics of capital flows and their effects on economic growth, macroeconomic volatility, and crisis risk. The course discusses the policy options available to reap the benefits of capital market integration while minimizing and mitigating its adverse effects. The course starts with a refresher on Balance of Payments statistics, and a description of the alternative measures of capital flows and financial (capital) account openness. The second part of the course introduces the determinants of capital flows and the link between these flows and economic growth, macroeconomic volatility, and crisis risk. The course concludes with a discussion of capital account management tools, and their relationship with financial regulation and exchange rate intervention. The course includes case studies on actual crises where participants will learn how policy settings and failures in recognizing and addressing the buildup of vulnerabilities led to crisis. Throughout the course, participants are expected to engage in discussions and will work on practical workshop exercises aimed at solidifying their understanding of the lecture material.
Upon completion of this course, participants should be able to:
• Explain the dynamics of the capital account using the balance of payments of a given country
• Identify the financial and economic risk(s) that a global capital market creates for small and large economies
• Identify how policy actions can influence (prevent) the occurrence of capital account crises and determine what challenges a country faces to stabilize the economy under different economic scenarios
• Evaluate the impact of financial reform policies on both economic growth and on the risk of financial crises
• Identify a capital account crisis and assess the associated costs
• Propose policy actions to address or avoid future crises and reduce their costs