Globalization has substantially increased the flow of private capital available to emerging markets compared with official flows from multilateral institutions. Countries that pursue sound polices will attract large capital inflows, but those that do not will suffer net capital outflows. This world of mobile capital raises important policy issues:
- Can capital controls protect countries like China from global market forces, or will controls simply postpone adjustment and misallocate resources?
- What is the impact of mobile capital on the conduct of monetary policy?
- Can the IMF help stabilize international financial markets by reducing contagion or does IMF lending increase risk exposure?
- What institutional changes should be made to the IMF and the global financial architecture to increase financial stability and avoid future crises?
- Those and related issues are the focus of the Cato Institute’s 22nd Annual Monetary Conference, International Monetary Reform and Capital Freedom, cosponsored with The Economist.