Atish R. Ghosh, Jonathan D. Ostry, Mahvash S. Qureshi, 12 May 2017

There has been growing recognition that emerging markets may benefit from more proactive management of capital flows, and thus avoid crises when the flows recede. But do they do this in practice? By analysing policy responses in a sample of emerging markets, this column argues that central banks respond to capital inflows through various tools. Ironically, the most commonly prescribed instrument for coping with capital inflows – tighter fiscal policy – is the least-used tool in practice.