Coping with volatile capital flows in Asia and the Pacific

Macroeconomic stability of economies is increasingly imperiled by the impact of volatile global short-term capital movements spurred by monetary policies in developed economies. In recent months there has been pressure for capital outflows from the region as sentiment grows that the United States Federal Reserve may soon be ending its quantitative easing programme.It is increasingly clear to policymakers in the region that the presence of destabilising volatile foreign short term capital in their economies need to be curtailed. Thus capital account regulations, also known as capital controls or capital flows management, have been gaining in popularity, as recommended by ESCAP over a number of years. This policy brief analyses the relative success of particular measures attempted by governments in both the region and further afield and offers a guide as to which types of capital account regulations are most likely to be effective.