evolution of imf’s policy on cross-border capital flows
in april 2022，the international monetary fund (imf) released the review of the institutional view on the liberalization and management of capital flows (hereinafter referred to as “the review”) as an update of its 2012 the liberalization and management of capital flows: an institutional view (hereinafter referred to as “the institutional view”). both documents have been deliberated and adopted by the executive board of imf，representing imf’s official and authoritative opinions. by exploring the evolution of imf’s policy on cross-border capital flows since its establishment，this report sheds light on the in-depth understanding of the profound changes in the international policies，and china’s managed rmb convertibility.
imf believes that the use of management on capital inflow surges can be in a preemptive manner
the review sticks to the core principles of imf’s cross-border capital management since 2012. the institutional view held that inflow surges can pose macroeconomic challenges and raise risks of financial instability in target countries. during a capital reversal，policy tools should be deployed in order: macroeconomic adjustment measures，macro-prudential measures (mpms)，and capital flow management measures (cfms) if necessary. this was restated in imf’s 2016 review of the institutional view. this time，in addition to reaffirming the risks of inflow surges，the review also expounds on the timing and coordination of policy tools.
the review points out that cross-border inflow surges can be managed preemptively. the institutional view focused on risk mitigation after inflow surges. the review holds that if currency mismatches arising from the accumulation of external debt have the potential to induce inflow surge risks，member states can deploy measures to manage the cross-border capital flows in a preemptive manner.
