Economies with less developed financial markets might find their integration into global financial markets associated with volatility in capital flows. Such
variability can prove to be disruptive to domestic economic and financial conditions, raising policy questions about how to realize the benefits from financial integration
while minimizing adverse spillovers. In the first instance, policy makers need to understand the dynamics of capital flows and the underlying sources of potential
instabilities before enacting a response. We dissect the capital accounts of Asia-Pacific economies associated with SEACEN and explore some important trends
and exposures.
The region has been subject to several financial shocks mainly reflected in bank-related capital flows. This is useful in understanding past crises but not
necessarily helpful in looking out for the next bout of instability. We discuss the possible implications of monetary policy normalization in the United States but
based on past cycles, see little cause for concern. Having said that, this is a unique juncture for the global financial system and uncertainty is higher than
usual.
The hierarchy of policy responses to concerns about capital movements ranges from longer-term structural economic and financial reforms to allow
economies to accommodate volatility, to crisis responses which are more temporary in nature. All policy reactions have costs and benefits. Importantly,
even in Asia Pacific, there appear to be few regularities that would allow generalized policy advice other than to do what this paper attempts to do –
dissect the capital account and exposures to make policy makers aware of looming vulnerabilities and appropriate responses.
CHAPTER 1: INTEGRATIVE REPORT – LIVING WITH VOLATILITIES: CAPITAL FLOWS AND POLICY IMPLICATIONS FOR SEACEN CENTRAL BANKS
By Chris Becker
CHAPTER 2: CAPITAL FLOW VOLATILITY AND ITS IMPLICATIONS FOR THE CENTRAL BANK – THE CASE OF CAMBODIA
By Oudom Cheng
CHAPTER 3: LIVING WITH VOLATILITIES: CAPITAL FLOWS AND THEIR IMPLICATIONS FOR CENTRAL BANK POLICIES – THE CASE OF INDONESIA
By Francisca Hastuti
CHAPTER 4: RECENT DEVELOPMENTS IN CAPITAL FLOWS: THE CASE OF SOUTH KOREA
By Dr. Kim Young Ju
CHAPTER 5: MANAGING CAPITAL FLOW VOLATILITY: RISKS AND CHALLENGES IN MALAYSIA
By Sim Wee Haw and Tengku Muhammad Azlan Ariff
CHAPTER 6: LIVING WITH VOLATILITIES: CAPITAL FLOWS AND THEIR IMPLICATIONS FOR CENTRAL BANK POLICIES IN MONGOLIA
By Munkhchimeg Sukhee and Tsenguunjav Byambasuren
CHAPTER 7: LIVING WITH CAPITAL FLOW VOLATILITY IN THE PHILIPPINES
By Justin Ray Angelo Fernandez and Angelo Paolo T. Kalaw
CHAPTER 8: CAPITAL FLOWS AND THEIR IMPLICATIONS FOR CENTRAL BANK POLICIES IN SRI LANKA
By Harsha Eranda Paranavithana
CHAPTER 9: INTERNATIONAL CAPITAL FLOWS IN CHINESE TAIPEI
By Ti-Jen Tsao
CHAPTER 10: LIVING WITH CAPITAL FLOW VOLATILITIES: THE CASE OF THAILAND
By Chanaporn Sereevoravitgul and Pim-Orn Watcharaprapapong
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