02678cas a2200325 a 4500 AALejournalIMF022297 230101c9999 xx r poo 0 0eng d 5.00 USD 9781616358341 1018-5941 BD-DhAAL BD-DhAAL Das, Mitali. Preemptive Policies and Risk-Off Shocks in Emerging Markets / Mitali Das, Gita Gopinath, Azebnem Kalemli-Ozcan. Washington, D.C. : International Monetary Fund, 2022. 1 online resource (54 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 We show that "preemptive" capital flow management measures (CFM) can reduce emerging markets and developing countries' (EMDE) external finance premia during risk-off shocks, especially for vulnerable countries. Using a panel dataset of 56 EMDEs during 1996-2020 at monthly frequency, we document that countries with preemptive policies in place during the five year window before risk-off shocks experienced relatively lower external finance premia and exchange rate volatility during the shock compared to countries which did not have such preemptive policies in place. We use the episodes of Taper Tantrum and COVID-19 as risk-off shocks. Our identification relies on a difference-in-differences methodology with country fixed effects where preemptive policies are ex-ante by construction and cannot be put in place as a response to the shock ex-post. We control the effects of other policies, such as monetary policy, foreign exchange interventions (FXI), easing of inflow CFMs and tightening of outflow CFMs that are used in response to the risk-off shocks. By reducing the impact of risk-off shocks on countries' funding costs and exchange rate volatility, preemptive policies enable countries' continued access to international capital markets during troubled times. Mode of access: Internet Financial Aspects of Economic Integration imf Foreign Exchange imf International Economics imf International Lending and Debt Problems imf Macroeconomics and Monetary Economics imf Gopinath, Gita. Kalemli-Ozcan, Azebnem. IMF Working Papers; Working Paper ; No. 2022/003 Full text available on IMF http://elibrary.imf.org/view/journals/001/2022/003/001.2022.issue-003-en.xml IMF e-Library