Global imbalances, volatile capital inflows and proposed further IMF roles

The recent diverging policy choices in the developed world and emerging market countries have been accompanied by a return of private cross-border capital inflows to a number of countries. The increasingly integrated global financial market has spurred capitals to fl ow more easily across borders in search for higher returns. Emerging market countries and commodity exporters have been the desirable destination of such flows. Major pull factors are noted, including improvement in the macroeconomics stability and management that have led to better growth prospects in EMEs and the opening-up of the capital account in varying degrees. These surges have also been driven by a number of push factors such as near zero policy rates in the major centers and perceived low returns in advanced economies. However, recipient countries have also noted the increased volatility of such capital inflows. While domestic policy mix is crucial, the potentially unprecedented repercussion of volatile capital flows requires multidimensional measures including ones originated from regional and global initiatives. The IMF is well-placed to play increasing roles in conducting surveillance, providing global liquidity through its financing facilities, and not less important, giving appropriate policy advices adopting more customised and open-minded perspectives.