01845cas a2200253 a 4500 AALejournalIMF000673 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451948189 1018-5941 BD-DhAAL BD-DhAAL Carranza, Luis. Policy Responses to External Imbalances in Emerging Market Economies : Further Empirical Results / Luis Carranza, Chorng-Huey Wong. Washington, D.C. : International Monetary Fund, 1998. 1 online resource (30 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students A bivariate vector-autoregression (VAR) model is used to test causal relations between the current account and the capital account in four emerging market economies. The results show that high capital mobility could be a major cause of current account instability. Therefore, macroeconomic policy to restore external balance must deal directly with capital inflows. The paper recommends making nominal exchange rate sufficiently flexible to avoid inconsistencies between short-run and long-run real exchange rates; complementing credit tightening by fiscal restraint to reduce interest rate differentials; and strengthening reforms and surveillance of the financial system to prevent banks from excessive risk taking. Mode of access: Internet Wong, Chorng-Huey. IMF Working Papers; Working Paper ; No. 1998/103 Full text available on IMF http://elibrary.imf.org/view/journals/001/1998/103/001.1998.issue-103-en.xml IMF e-Library