TARGET GROUP | Junior to mid-level policy makers in central banks and finance ministries who have policy responsibilities related to capital account management. No prior knowledge of the material is required. Participants are expected to have an advanced degree in economics or equivalent experience, good quantitative skills, and a basic knowledge of Microsoft Excel. It is recommended that applicants have taken either the Financial Programming and Policies (FPP) or the Macroeconomic Diagnostics (MDS) course.
DESCRIPTION | This course, presented by the Institute for Capacity Development, is devoted to fostering understanding of the dynamics of capital flows and their effects on economic growth, macroeconomic volatility, and risk of crisis. The course starts with a refresher on balance of payments statistics and a description of 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 continues with a discussion of sequencing capital account liberalization to reap the benefits of capital market integration while minimizing and mitigating its adverse effects. This is followed by coverage of analytical methods and data sources for the analysis and forecasting of capital flows. The course concludes with a discussion the IMF’s Institutional View on capital flows and how it relates to macroeconomic policy, financial regulation, and exchange rate intervention. The course includes case studies of actual crises, so that participants learn how policy setting and failure to recognize and address the buildup of vulnerabilities led to crisis. Throughout the course, participants are expected to engage in discussions and work on practical workshop exercises to solidify their understanding of the lecture material.
OBJECTIVES | 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 risks that a global capital market creates for both small and large economies.
• Determine what challenges a country faces in attempting to stabilize the economy under different economic scenarios.
• Understand the appropriate sequencing of capital account liberalization and associated reforms.
• Identify how policy actions can influence or prevent the occurrence of capital account crises.
• Evaluate the impact of financial reform policies on both economic growth and the risk of financial crisis.
• Understand the key features of the IMF’s Institutional View, and the use of macroeconomic policies, macroprudential measures and capital flow management tools.
• Propose policy actions to address or avoid future crises and reduce their costs.