The aim of this empirical study is to describe and provide analysis on the experience of managing capital flows in Iceland and the Baltic countries. During the build-up of the crisis, there were shortcomings in macroeconomic policies and in the policy mix, as well as in financial supervision in the countries covered. While the use of traditional macroeconomic and structural policies was far from exhausted, recognizing that there are no substitutes for sound macroeconomic policies, with an IMF framework on capital flows in place prior to the crisis, it might have been easier for the IMF and national policymakers to identify accelerating problems at an early stage and address them with targeted measures.
International Monetary Fund. External Relations Dept.
Crisis prevention is the primary focus of the IMF’s reform agenda, but work is also continuing on ways to improve the management and resolution of the financial crises that do occur. Indeed, a stronger and clearer framework for crisis resolution is expected to help lessen the number and severity of crises. The IMF is seeking to combine a clearer policy on access to IMF resources and greater selectivity in its lending with an examination of possible approaches to strengthening the mechanisms for restructuring unsustainable sovereign debt.