1 00:00:10,760 --> 00:00:14,640 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,680 --> 00:00:20,360 Speaker 1: I'm Joe Wisnal and I'm Tracy Halloway. So, Tracy, evolution 3 00:00:20,720 --> 00:00:24,120 Speaker 1: of economic thought is a big topic for us, especially 4 00:00:24,160 --> 00:00:27,280 Speaker 1: this year. UM, a lot of a lot of discussion 5 00:00:27,320 --> 00:00:31,480 Speaker 1: and about monetary policy, fiscal policy. Uh, one of our 6 00:00:31,520 --> 00:00:34,960 Speaker 1: recurring themes, no doubt. Yeah, I mean it feels like 7 00:00:35,200 --> 00:00:39,479 Speaker 1: a lot of these conversations had begun even before, but 8 00:00:39,640 --> 00:00:42,400 Speaker 1: this year is kind of the one that makes everyone 9 00:00:42,479 --> 00:00:45,760 Speaker 1: start taking them or at least talking about them seriously. 10 00:00:45,840 --> 00:00:50,800 Speaker 1: So things like modern monetary theory, once considered very very heterodox, 11 00:00:50,920 --> 00:00:53,840 Speaker 1: are now I mean now you see certain US politicians 12 00:00:53,880 --> 00:00:57,240 Speaker 1: talking about it. Uh, the idea of a greater role 13 00:00:57,320 --> 00:01:01,160 Speaker 1: for fiscal policy alongside money policy. There are a lot 14 00:01:01,320 --> 00:01:05,399 Speaker 1: of standard thoughts that are being overturned or at the 15 00:01:05,480 --> 00:01:10,200 Speaker 1: beginning of being overturned maybe right some some stage of evolution. 16 00:01:10,319 --> 00:01:12,720 Speaker 1: We haven't really I mean, we've done a little bit, 17 00:01:12,720 --> 00:01:16,240 Speaker 1: but we haven't really taken this sort of theme of 18 00:01:16,959 --> 00:01:21,800 Speaker 1: evolution however, within the context of say emerging markets, or 19 00:01:21,840 --> 00:01:23,720 Speaker 1: we haven't really done as much on it. We've done 20 00:01:23,720 --> 00:01:27,160 Speaker 1: a little actually, but not that much yet. Yeah. So 21 00:01:27,240 --> 00:01:31,360 Speaker 1: emerging markets this year, we're pretty interesting clearly under a 22 00:01:31,360 --> 00:01:33,479 Speaker 1: lot of stress because these are the countries that are 23 00:01:33,640 --> 00:01:38,520 Speaker 1: dealing with a huge case load of the virus, the coronavirus, 24 00:01:38,640 --> 00:01:42,920 Speaker 1: and also dealing with the economic fallout um of everything 25 00:01:42,920 --> 00:01:44,800 Speaker 1: that's going on in the rest of the world. So 26 00:01:44,880 --> 00:01:46,959 Speaker 1: it feels like they're sort of getting this double whammy 27 00:01:47,080 --> 00:01:50,480 Speaker 1: of maybe not having as great health systems as a 28 00:01:50,480 --> 00:01:53,240 Speaker 1: lot of the developed world, but still having to deal 29 00:01:53,520 --> 00:01:57,640 Speaker 1: with the economic impacts. So, you know, back in March, 30 00:01:57,840 --> 00:02:00,720 Speaker 1: remember like e M looked like it was very much 31 00:02:00,760 --> 00:02:04,840 Speaker 1: in trouble. Yeah, you know, I really do think and 32 00:02:05,040 --> 00:02:07,320 Speaker 1: it's not exactly what we're gonna be talking about today, 33 00:02:07,360 --> 00:02:10,079 Speaker 1: but I do think one of the themes from that's 34 00:02:10,120 --> 00:02:14,320 Speaker 1: going to be interesting in retrospect and with pretty important implications, 35 00:02:14,760 --> 00:02:20,000 Speaker 1: is whether various EMS have more policy flexibility that previously appreciated. 36 00:02:20,320 --> 00:02:22,920 Speaker 1: Whether it's their ability to do quantitative easing, whether it's 37 00:02:22,960 --> 00:02:26,560 Speaker 1: their ability to run fiscal deficits. It's possible that after 38 00:02:28,280 --> 00:02:31,720 Speaker 1: UM people might start to think that some e M 39 00:02:31,760 --> 00:02:35,320 Speaker 1: s might have more more space to engage in countercyclical 40 00:02:35,320 --> 00:02:39,160 Speaker 1: policy than previously appreciate. It. Oh, absolutely, and we're already 41 00:02:39,240 --> 00:02:41,600 Speaker 1: sort of seeing that because Indonesia, I mean, who would 42 00:02:41,600 --> 00:02:44,120 Speaker 1: have thought a few years ago the Indonesia would be 43 00:02:44,160 --> 00:02:47,840 Speaker 1: the first central bank to do direct financing UH and 44 00:02:48,000 --> 00:02:51,400 Speaker 1: in that's entirely possible. So we are seeing some of 45 00:02:51,480 --> 00:02:57,440 Speaker 1: the Yeah, so we are seeing some emerging markets experimenting 46 00:02:57,440 --> 00:03:01,320 Speaker 1: with new types of policy. An are a big question, 47 00:03:01,600 --> 00:03:05,000 Speaker 1: of course, and this is something that Yeah, it is 48 00:03:05,000 --> 00:03:10,720 Speaker 1: a constant theme in discussions relate relate to UH control 49 00:03:10,840 --> 00:03:15,400 Speaker 1: of the capital account, limiting hot money or money coming 50 00:03:15,440 --> 00:03:20,120 Speaker 1: in coming out UM. The degree to which h e 51 00:03:20,320 --> 00:03:24,680 Speaker 1: M s should keep a tight leash on capital inflows 52 00:03:24,760 --> 00:03:28,000 Speaker 1: and outflows is something that always gets debated, and there's 53 00:03:28,040 --> 00:03:31,760 Speaker 1: always sort of a rethinking about what is the appropriate 54 00:03:31,840 --> 00:03:37,240 Speaker 1: degree to which such things should be tightly controlled. Yeah, 55 00:03:37,320 --> 00:03:39,720 Speaker 1: and I think I mean, for years and years and years, 56 00:03:39,760 --> 00:03:45,000 Speaker 1: it was pretty clear that the international political system, I 57 00:03:45,040 --> 00:03:49,680 Speaker 1: guess had a bias against capital controls. You know, they 58 00:03:49,720 --> 00:03:52,680 Speaker 1: wanted liberalization of the current account, they wanted money to 59 00:03:52,720 --> 00:03:57,200 Speaker 1: flow freely between countries, and we've seen at various points 60 00:03:57,240 --> 00:03:59,840 Speaker 1: in time that that's not always in the best intro 61 00:04:00,240 --> 00:04:03,120 Speaker 1: of the country itself. So you know, for instance, if 62 00:04:03,120 --> 00:04:05,400 Speaker 1: you're an emerging market somewhere, and suddenly you've got this 63 00:04:05,520 --> 00:04:08,800 Speaker 1: influx of hot money from abroad because people are looking 64 00:04:08,840 --> 00:04:11,520 Speaker 1: for yield and they pour it all into your housing 65 00:04:11,560 --> 00:04:15,000 Speaker 1: market or something like that that might not actually be 66 00:04:15,200 --> 00:04:17,680 Speaker 1: what you want at that particular moment in time, an 67 00:04:17,680 --> 00:04:21,560 Speaker 1: overheated housing market. So that's been an ongoing debate, and 68 00:04:21,720 --> 00:04:24,440 Speaker 1: I think you're right, we're starting to see some discussion 69 00:04:24,480 --> 00:04:28,400 Speaker 1: of it again. Provides another sort of catalyst to look 70 00:04:28,480 --> 00:04:32,560 Speaker 1: into this topic. Exactly right. Well, we have two very 71 00:04:32,600 --> 00:04:36,400 Speaker 1: great guests. I'm excited to chat with him about this topic. 72 00:04:36,440 --> 00:04:39,159 Speaker 1: We're going to be speaking with a percosh Lengani. He's 73 00:04:39,160 --> 00:04:42,400 Speaker 1: assistant director and senior personnel manager in the i m 74 00:04:42,480 --> 00:04:46,920 Speaker 1: f S Independent Evaluation Office. Well Is trurom Balis Supermania 75 00:04:46,920 --> 00:04:50,000 Speaker 1: and a senior research officer at the i e O 76 00:04:50,120 --> 00:04:52,719 Speaker 1: and I m F excited about talking to both of 77 00:04:52,720 --> 00:04:56,800 Speaker 1: them on this topic. They both recently done work on this. Uh. Prakash, 78 00:04:56,880 --> 00:04:58,920 Speaker 1: thank you very much for joining us. Thanks show, It's 79 00:04:58,960 --> 00:05:00,359 Speaker 1: it's great to be on this show over with you 80 00:05:00,400 --> 00:05:03,640 Speaker 1: and Tracy have. I've really enjoyed listening to your podcast. Oh, 81 00:05:03,720 --> 00:05:07,400 Speaker 1: thank you and sure wrong thank you as well. Hi. Guys, 82 00:05:07,440 --> 00:05:09,680 Speaker 1: how are you doing? Good to be on this podcast. 83 00:05:10,040 --> 00:05:12,159 Speaker 1: Very kind of both of you to say, well, let's 84 00:05:12,160 --> 00:05:14,880 Speaker 1: get started, percush if you want to kick us off. 85 00:05:15,080 --> 00:05:18,240 Speaker 1: You know, we talked about evolution of thought. But for 86 00:05:18,320 --> 00:05:22,360 Speaker 1: those unfamiliar, I include myself in the category just to 87 00:05:22,400 --> 00:05:26,080 Speaker 1: be clear. But for those unfamiliar, what has been the 88 00:05:26,200 --> 00:05:31,280 Speaker 1: sort of orthodox standard I am F view on how 89 00:05:31,320 --> 00:05:35,240 Speaker 1: to think about capital control? Okay, well, I don't want 90 00:05:35,279 --> 00:05:38,880 Speaker 1: to take you too far back into history, but but 91 00:05:39,920 --> 00:05:43,920 Speaker 1: you know, a pre orthodox view, actually around the time 92 00:05:43,960 --> 00:05:48,320 Speaker 1: that the IMF was created, one espoused by Keynes and 93 00:05:49,040 --> 00:05:52,360 Speaker 1: Harry dextra White at the U. S. Treasury, was that 94 00:05:52,440 --> 00:05:56,080 Speaker 1: you could have free trade, but you needed to actually 95 00:05:56,080 --> 00:05:59,320 Speaker 1: have capital controls. So when the I m F was founded, 96 00:06:00,160 --> 00:06:04,599 Speaker 1: the prevailing viewers that you actually needed capital controls, that 97 00:06:04,680 --> 00:06:09,159 Speaker 1: you really couldn't have the instability that the free movement 98 00:06:09,200 --> 00:06:13,560 Speaker 1: of foreign capital might bring about. But then you had 99 00:06:13,560 --> 00:06:17,160 Speaker 1: the Berlin volved falling and capitalism was the only game 100 00:06:17,200 --> 00:06:21,119 Speaker 1: in town, and everyone thought, look, what this is telling 101 00:06:21,200 --> 00:06:25,960 Speaker 1: us is that you know, capitalism rules, and we should 102 00:06:26,000 --> 00:06:30,320 Speaker 1: just have freedom of mobility, not just of trade the 103 00:06:30,360 --> 00:06:34,240 Speaker 1: way we've been having, but of the mobility of capital. 104 00:06:34,920 --> 00:06:40,200 Speaker 1: And so you know, in the early nineties, the U. S. 105 00:06:40,240 --> 00:06:43,880 Speaker 1: Treasury and the i m F, I think, for understandable reasons, 106 00:06:43,920 --> 00:06:49,800 Speaker 1: given the big events that had just happened, took the 107 00:06:49,880 --> 00:06:52,880 Speaker 1: view that, you know, that emerging markets and others should 108 00:06:52,880 --> 00:06:57,520 Speaker 1: be opening up to foreign capital and that they should 109 00:06:57,520 --> 00:07:01,719 Speaker 1: be having open capital mark it's and so this was 110 00:07:01,800 --> 00:07:05,760 Speaker 1: kind of the view as Tracy was describing, sort of 111 00:07:06,200 --> 00:07:09,760 Speaker 1: as of as of twenty years ago, which is around 112 00:07:09,800 --> 00:07:12,400 Speaker 1: the time that I I moved from the from the 113 00:07:12,400 --> 00:07:17,000 Speaker 1: FED to the I m F. So that's that's that's 114 00:07:17,040 --> 00:07:20,960 Speaker 1: where things were. I mean that definitely as as Tracy 115 00:07:21,040 --> 00:07:25,040 Speaker 1: was saying, sort of a bias that said, you know, 116 00:07:26,000 --> 00:07:28,640 Speaker 1: capital should be free to move across countries. You really 117 00:07:28,640 --> 00:07:32,840 Speaker 1: should not have capital controls. So I'm curious twenty years 118 00:07:32,840 --> 00:07:37,000 Speaker 1: ago was there much discussion of the pros and cons 119 00:07:37,040 --> 00:07:41,040 Speaker 1: of capital controls or to what degree was it considered 120 00:07:41,520 --> 00:07:46,640 Speaker 1: economic orthodoxy that you wanted free flow of money across borders. 121 00:07:48,320 --> 00:07:52,920 Speaker 1: I think there were always some skeptics of the view 122 00:07:53,000 --> 00:07:59,280 Speaker 1: that allowing capital to flow freely across national boundaries would 123 00:08:00,040 --> 00:08:04,520 Speaker 1: always bring about the benefits to the recipient countries. But 124 00:08:04,840 --> 00:08:08,200 Speaker 1: I would say that, you know, sort of after the 125 00:08:08,240 --> 00:08:10,320 Speaker 1: fall of the Berlin Wall, there was a there was 126 00:08:10,360 --> 00:08:13,679 Speaker 1: a sense of euphoria that we needed to be open 127 00:08:13,800 --> 00:08:18,440 Speaker 1: to all forms of capitalism, including sort of financial capitalism 128 00:08:18,440 --> 00:08:22,000 Speaker 1: and financial globalization. So there were people like you know, 129 00:08:22,080 --> 00:08:26,600 Speaker 1: Joe Stiglitz and Danny Roderick who were a bit more skeptical, 130 00:08:26,920 --> 00:08:30,040 Speaker 1: or I would say quite a bit skeptical that that 131 00:08:30,160 --> 00:08:36,240 Speaker 1: foreign capital would deliver benefits. But I think that most 132 00:08:36,280 --> 00:08:38,440 Speaker 1: of us, I think it's sort of drunk the kool 133 00:08:38,480 --> 00:08:42,640 Speaker 1: aid and and we're very much in favor of of 134 00:08:42,640 --> 00:08:46,560 Speaker 1: of having sort of open capital markets. I mean, I 135 00:08:46,600 --> 00:08:51,680 Speaker 1: certainly was in that camp twenty years ago. So this 136 00:08:51,840 --> 00:08:56,000 Speaker 1: might be another sort of remedial question. But I understand 137 00:08:56,080 --> 00:09:02,840 Speaker 1: an extremely high abstract level what open capital accounts mean 138 00:09:03,000 --> 00:09:06,040 Speaker 1: and free flow of capital, But what does that actually 139 00:09:06,080 --> 00:09:09,160 Speaker 1: mean capital controls? So if you say a country has 140 00:09:09,240 --> 00:09:13,640 Speaker 1: implemented capital controls or maybe a country ought to consider them, 141 00:09:13,720 --> 00:09:17,559 Speaker 1: what are we typically talking about in practice in terms 142 00:09:17,559 --> 00:09:20,000 Speaker 1: of creating an impediment to that free flow? Yes, so 143 00:09:20,040 --> 00:09:26,160 Speaker 1: I think we're talking about things that would discriminate against 144 00:09:26,800 --> 00:09:33,880 Speaker 1: foreigners versus domestic residents. We're talking about things that would say, 145 00:09:34,040 --> 00:09:37,640 Speaker 1: if you want to bring in capital for a long 146 00:09:37,679 --> 00:09:40,480 Speaker 1: period of time two or three years, we will give 147 00:09:40,520 --> 00:09:43,440 Speaker 1: you the following tax treatment. But if you want to 148 00:09:43,480 --> 00:09:46,840 Speaker 1: bring in capital just for a short amount of time, 149 00:09:47,000 --> 00:09:49,560 Speaker 1: you have to pay a higher tax. So you know, 150 00:09:49,720 --> 00:09:54,200 Speaker 1: the question is I think most people recognize that there 151 00:09:54,320 --> 00:09:57,240 Speaker 1: is sort of a pecking orders, as you and Tracy 152 00:09:57,320 --> 00:10:00,840 Speaker 1: were kind of discussing already. I'm among the kinds of 153 00:10:01,280 --> 00:10:03,680 Speaker 1: flows of capital that you know. There are some like 154 00:10:03,760 --> 00:10:08,360 Speaker 1: foreign direct investment, where I think the benefits are much 155 00:10:08,400 --> 00:10:12,480 Speaker 1: more easy to demonstrate, and there is the hot money 156 00:10:12,480 --> 00:10:15,240 Speaker 1: that you guys were talking about, where it's not very 157 00:10:15,320 --> 00:10:18,800 Speaker 1: clear what the benefits are. And you know, no less 158 00:10:18,800 --> 00:10:22,240 Speaker 1: a person than stan Fisher. I remember hearing about what 159 00:10:22,240 --> 00:10:25,280 Speaker 1: he said at Jackson All conference where he said Israel's governor, 160 00:10:25,320 --> 00:10:27,719 Speaker 1: he said, I don't know what possible benefits that can 161 00:10:27,760 --> 00:10:31,440 Speaker 1: be for us from short term capital flows. And you know, 162 00:10:31,480 --> 00:10:36,480 Speaker 1: this is Stan Fisher, this is not, you know, just 163 00:10:36,480 --> 00:10:40,800 Speaker 1: just some French French person. So I think, yeah, exactly, 164 00:10:41,640 --> 00:10:45,040 Speaker 1: I think that that the impediments we're talking about are 165 00:10:45,400 --> 00:10:52,000 Speaker 1: sort of discriminatory taxes to discourage foreign capital when it 166 00:10:52,120 --> 00:10:56,280 Speaker 1: is viewed that it is not serving the functions described 167 00:10:56,440 --> 00:11:02,600 Speaker 1: that that was subscribed, or trying to put impediments that 168 00:11:02,640 --> 00:11:06,320 Speaker 1: would try to force the foreign capital into longer duration 169 00:11:07,080 --> 00:11:11,280 Speaker 1: investments rather than hot money. Can you talk a little 170 00:11:11,280 --> 00:11:17,199 Speaker 1: bit about what impact capital controls can have on monetary 171 00:11:17,240 --> 00:11:21,160 Speaker 1: policy of you know, a domestic emerging market. We talk 172 00:11:21,200 --> 00:11:24,840 Speaker 1: a lot about the impossible trinity, or the idea that 173 00:11:24,920 --> 00:11:28,760 Speaker 1: you can only have two of three things. I think 174 00:11:28,840 --> 00:11:33,559 Speaker 1: it's a stable exchange rate, an independent monetary policy, and 175 00:11:33,559 --> 00:11:36,800 Speaker 1: an open capital account. So you can't have all three 176 00:11:36,800 --> 00:11:40,280 Speaker 1: of those at once. What are the sort of limiting 177 00:11:40,600 --> 00:11:45,040 Speaker 1: factors on emerging markets when it comes to how they 178 00:11:45,080 --> 00:11:48,400 Speaker 1: control the flow of capital in and out. Yeah, So 179 00:11:48,440 --> 00:11:51,760 Speaker 1: with capital controls, what emerging markets are trying to do 180 00:11:51,920 --> 00:11:55,520 Speaker 1: is to sort of operate in the in the gray 181 00:11:55,679 --> 00:11:58,800 Speaker 1: zone of the impossible trinity. They're kind of trying to, 182 00:12:00,040 --> 00:12:02,360 Speaker 1: you know, in a way, work around it by saying, 183 00:12:03,200 --> 00:12:07,520 Speaker 1: when problems get get severe, we are going to, you know, 184 00:12:07,600 --> 00:12:12,160 Speaker 1: get around it by imposing controls temporarily at least in 185 00:12:12,280 --> 00:12:17,520 Speaker 1: order to manage the inflows of foreign capital. So it 186 00:12:17,679 --> 00:12:22,600 Speaker 1: is indeed a way of getting around the so called 187 00:12:23,080 --> 00:12:27,040 Speaker 1: impossible trinity from theory as you know, from the work 188 00:12:27,080 --> 00:12:30,120 Speaker 1: of Ellen Ray and others, which I suspect you have 189 00:12:30,720 --> 00:12:34,200 Speaker 1: covered in the past, emerging markets actually claim that they 190 00:12:34,240 --> 00:12:37,920 Speaker 1: have an even tougher time because regardless of the exchange 191 00:12:38,040 --> 00:12:41,600 Speaker 1: rate that they choose, they feel that they are sort 192 00:12:41,640 --> 00:12:46,160 Speaker 1: of helpless in the face of foreign capital. So the 193 00:12:46,280 --> 00:12:49,880 Speaker 1: use of capital controls, the use of foreign exchange intervention, 194 00:12:49,960 --> 00:12:53,800 Speaker 1: which I should mention is is another prominent tool that 195 00:12:53,880 --> 00:12:57,719 Speaker 1: emerging markets are using. The use of these tools is 196 00:12:57,760 --> 00:13:01,240 Speaker 1: a way too again as you and you were saying, 197 00:13:01,280 --> 00:13:05,640 Speaker 1: kind of regain some policy space, Um, I mean, as 198 00:13:05,679 --> 00:13:09,120 Speaker 1: you were saying, I mean during the pandemic, we've discovered 199 00:13:09,160 --> 00:13:11,960 Speaker 1: that you know, many e M central banks have been 200 00:13:12,000 --> 00:13:16,480 Speaker 1: able to march into quantitative easing, and that's been a 201 00:13:16,520 --> 00:13:21,680 Speaker 1: way of gaining some policy space. But capital controls and 202 00:13:21,720 --> 00:13:26,920 Speaker 1: foreign exchange intervention are other tools that that these countries 203 00:13:26,960 --> 00:13:32,960 Speaker 1: have been using in order to have some defense when 204 00:13:33,880 --> 00:13:37,439 Speaker 1: there are surges of foreign capital that come into their 205 00:13:37,480 --> 00:13:43,240 Speaker 1: countries driven by you know, changes in market sentiment elsewhere. 206 00:13:43,280 --> 00:13:46,400 Speaker 1: So if you have risk on risk of episodes in 207 00:13:46,480 --> 00:13:50,720 Speaker 1: the advanced economies, these countries are faced by huge surges 208 00:13:50,760 --> 00:13:55,240 Speaker 1: of foreign capital. And to say that, well, you should 209 00:13:55,280 --> 00:13:58,480 Speaker 1: just tighten fiscal policy, or you should just let the 210 00:13:58,520 --> 00:14:06,480 Speaker 1: exchange rate appreciate um and say, well that's it. That's 211 00:14:06,520 --> 00:14:09,559 Speaker 1: what orthodox city tells you, and that's that's the best 212 00:14:10,400 --> 00:14:15,040 Speaker 1: we can do for you. Has frankly proven not acceptable 213 00:14:15,040 --> 00:14:18,400 Speaker 1: to these countries, and they have sort of innovated by 214 00:14:18,480 --> 00:14:23,520 Speaker 1: you know, using capital controls on occasion, by foreign exchange intervention, 215 00:14:24,120 --> 00:14:28,880 Speaker 1: and now after the pandemic, through quantitative easing. So I 216 00:14:28,880 --> 00:14:33,760 Speaker 1: think that what these countries are saying is that, you know, 217 00:14:33,840 --> 00:14:36,760 Speaker 1: we can be unconventional, just as you folks in the 218 00:14:36,760 --> 00:14:41,480 Speaker 1: advanced countries were, Well, I want to get to in 219 00:14:41,480 --> 00:14:45,320 Speaker 1: a minute this sort of beginning of the shift you described, 220 00:14:45,320 --> 00:14:48,840 Speaker 1: maybe starting twenty years ago, some rethinking why but before 221 00:14:48,880 --> 00:14:53,200 Speaker 1: we do that, just for listeners, I feel like when 222 00:14:53,240 --> 00:14:57,680 Speaker 1: I hear foreign capital coming in, that doesn't automatically seem 223 00:14:57,760 --> 00:14:59,960 Speaker 1: like a bad thing or risk. It's like capital, that's 224 00:15:00,000 --> 00:15:02,640 Speaker 1: great money. Cash. You're like, you know, the sort of 225 00:15:02,640 --> 00:15:06,280 Speaker 1: intuitive thing is it's what's it's not immediately intuitive why 226 00:15:06,320 --> 00:15:08,760 Speaker 1: that would ever be a problem. Can you just walk 227 00:15:08,840 --> 00:15:12,440 Speaker 1: through real quickly sort of like what is the sequence 228 00:15:12,480 --> 00:15:16,680 Speaker 1: of events in the classical sort of how these things 229 00:15:16,720 --> 00:15:20,640 Speaker 1: go such that an influx of foreign capital ends up 230 00:15:20,720 --> 00:15:24,160 Speaker 1: creating a crisis or a problem for the recipient country. 231 00:15:24,960 --> 00:15:28,360 Speaker 1: You're absolutely right. I mean, we don't want to leave 232 00:15:28,400 --> 00:15:32,560 Speaker 1: people with the impression that you know, foreign capital is 233 00:15:32,560 --> 00:15:35,360 Speaker 1: is this is this terrible thing. I mean, you and 234 00:15:35,400 --> 00:15:40,960 Speaker 1: I within the US live within free capital markets, within 235 00:15:41,000 --> 00:15:45,200 Speaker 1: our borders, and it would be very difficult for us 236 00:15:45,200 --> 00:15:48,320 Speaker 1: to be convinced that if DC and Maryland and Virginia 237 00:15:48,400 --> 00:15:50,600 Speaker 1: put capital control, so this is going to make our 238 00:15:50,640 --> 00:15:54,440 Speaker 1: lives much better. So so it's true that we don't 239 00:15:54,440 --> 00:15:57,280 Speaker 1: want to create the impression that foreign capital does not 240 00:15:57,440 --> 00:16:00,720 Speaker 1: deliver benefits. It does. But the fact is that the 241 00:16:00,760 --> 00:16:06,400 Speaker 1: global economic system is not at the point where US 242 00:16:06,440 --> 00:16:10,440 Speaker 1: states are within within the United States, so the capacity 243 00:16:10,480 --> 00:16:14,000 Speaker 1: to absorb foreign capital is not the same the way 244 00:16:14,000 --> 00:16:17,440 Speaker 1: it is within the United States. The impact that it 245 00:16:17,560 --> 00:16:23,000 Speaker 1: has on particular sectors within your economy can be quite extreme. 246 00:16:23,200 --> 00:16:27,280 Speaker 1: I think Tracy mentioned the example of housing sectors within 247 00:16:27,360 --> 00:16:30,160 Speaker 1: many of these countries. So you have a flood of 248 00:16:31,240 --> 00:16:36,560 Speaker 1: foreign capital coming and suddenly house prices go up in Singapore, 249 00:16:36,800 --> 00:16:42,600 Speaker 1: in Canada, in Australia, in New Zealand, in in Hong Kong. 250 00:16:43,080 --> 00:16:46,880 Speaker 1: So one of the things that has happened is that 251 00:16:47,560 --> 00:16:52,520 Speaker 1: countries like Canada, in Australia and New Zealand, what we 252 00:16:52,600 --> 00:16:56,600 Speaker 1: think of, as you know, champions of free capital mobility, 253 00:16:56,680 --> 00:17:00,360 Speaker 1: have had to put in place some men years that 254 00:17:00,440 --> 00:17:04,480 Speaker 1: we would call capital controls in order to protect housing 255 00:17:04,560 --> 00:17:09,119 Speaker 1: from being unaffordable in Toronto and Vancouver and Sydney and Melbourne. 256 00:17:09,720 --> 00:17:13,280 Speaker 1: So if you can, if you can imagine that these 257 00:17:13,359 --> 00:17:16,679 Speaker 1: kinds of effects are happening in Canada and Australia, you 258 00:17:16,720 --> 00:17:20,720 Speaker 1: can imagine what's happening in a typical emerging market country. 259 00:17:21,240 --> 00:17:25,639 Speaker 1: When you're getting this huge inflow of foreign capital, you 260 00:17:25,720 --> 00:17:28,600 Speaker 1: have a financial sector that may not be fully developed 261 00:17:29,119 --> 00:17:32,960 Speaker 1: and cannot really perform the function of taking that capital 262 00:17:33,119 --> 00:17:37,199 Speaker 1: and matching it two good users. Often it's going to 263 00:17:37,320 --> 00:17:41,280 Speaker 1: end up boosting prices in the housing sector, and from 264 00:17:41,280 --> 00:17:44,639 Speaker 1: the perspective of the local residents, it's like, is this 265 00:17:44,760 --> 00:17:47,800 Speaker 1: doing me any good? I mean, is it really to 266 00:17:47,880 --> 00:17:52,119 Speaker 1: my benefit that house prices are going up in some 267 00:17:52,200 --> 00:17:56,080 Speaker 1: neighborhoods in my cities? And so I think it's a 268 00:17:56,160 --> 00:18:00,000 Speaker 1: question of absorption capacity. It's a question of how quickly 269 00:18:00,040 --> 00:18:03,439 Speaker 1: the money can flow in and out. Domestic money is 270 00:18:03,440 --> 00:18:07,600 Speaker 1: still going to be with you for a while. Foreign money, 271 00:18:07,680 --> 00:18:11,080 Speaker 1: at the first sign of trouble can easily leave the 272 00:18:11,119 --> 00:18:14,119 Speaker 1: country and cause trouble. So I think I hope that 273 00:18:14,200 --> 00:18:16,680 Speaker 1: gives you a sort of a flavor of why it 274 00:18:16,920 --> 00:18:20,880 Speaker 1: is that we can be fully in favor of foreign capital, 275 00:18:22,000 --> 00:18:27,879 Speaker 1: particularly where countries have a financing gap, but nevertheless, you know, 276 00:18:28,040 --> 00:18:32,679 Speaker 1: question and make sure that it is actually fulfilling the 277 00:18:32,720 --> 00:18:51,880 Speaker 1: function that theory as signs it. So now that we've 278 00:18:51,920 --> 00:18:55,600 Speaker 1: sort of set the scene about how people have been 279 00:18:55,600 --> 00:19:00,200 Speaker 1: thinking about capital controls and why we don't necessarily want 280 00:19:00,280 --> 00:19:04,400 Speaker 1: big influxes of money or outpots of money either, could 281 00:19:04,440 --> 00:19:07,399 Speaker 1: you maybe talk about what what do you think is 282 00:19:07,520 --> 00:19:12,159 Speaker 1: changing now? What's the spark that has set off a 283 00:19:12,240 --> 00:19:16,119 Speaker 1: sort of review of this particular idea At the I 284 00:19:16,280 --> 00:19:19,399 Speaker 1: m F. It's it's been an evolution, so it's I 285 00:19:19,600 --> 00:19:23,480 Speaker 1: wouldn't say that there was you know, like one big 286 00:19:23,520 --> 00:19:27,600 Speaker 1: event that set off this review. I think ever since 287 00:19:27,680 --> 00:19:32,679 Speaker 1: the crisis in Thailand and Indonesia and Korea and you know, 288 00:19:32,760 --> 00:19:36,760 Speaker 1: in major Asian countries, there has been a rethink going on. 289 00:19:38,320 --> 00:19:42,000 Speaker 1: And what happened is that after the global financial crisis, 290 00:19:43,600 --> 00:19:47,880 Speaker 1: many countries started using sort of a heterodox policy tool 291 00:19:47,960 --> 00:19:52,520 Speaker 1: kit to manage surges of inflows as well as setten 292 00:19:52,600 --> 00:19:57,880 Speaker 1: outflows um which led the i m F to say, look, 293 00:19:57,960 --> 00:20:01,840 Speaker 1: I mean, you know, we've been thinking of moving in 294 00:20:01,880 --> 00:20:06,240 Speaker 1: this direction anyway for the last twenty years, and here 295 00:20:06,280 --> 00:20:10,200 Speaker 1: are all these countries after the global financial crisis, affected 296 00:20:10,200 --> 00:20:14,160 Speaker 1: by this crisis, through no fault of their own, trying 297 00:20:14,200 --> 00:20:18,760 Speaker 1: to use, you know, a kind of heterodox policy tool 298 00:20:18,840 --> 00:20:23,120 Speaker 1: kit to manage inflows and outflows. And so in twelve 299 00:20:23,240 --> 00:20:27,240 Speaker 1: the i m F actually sort of officially changed its 300 00:20:27,560 --> 00:20:31,119 Speaker 1: view on the use of capital controls. It said that, 301 00:20:31,680 --> 00:20:35,399 Speaker 1: you know, it recognized that these tools were useful in 302 00:20:35,440 --> 00:20:39,760 Speaker 1: some contexts and that the country should be using them 303 00:20:41,119 --> 00:20:43,880 Speaker 1: when it was in their best interest to do so. 304 00:20:45,119 --> 00:20:47,120 Speaker 1: And at the time this was treated as a big deal. 305 00:20:47,160 --> 00:20:50,919 Speaker 1: I mean, I remember Paul Krugman saying this was a 306 00:20:50,960 --> 00:20:56,320 Speaker 1: sign of the IMF surprising intellectual flexibility. And I know 307 00:20:56,400 --> 00:20:59,720 Speaker 1: that the economists wrote it up at the economists wrote 308 00:20:59,720 --> 00:21:02,240 Speaker 1: it up as the relation. You know, it's like the 309 00:21:02,480 --> 00:21:07,000 Speaker 1: pope had changed the Catholic view on something. So but 310 00:21:07,040 --> 00:21:09,840 Speaker 1: it was really an evolution in the direction of saying, 311 00:21:09,880 --> 00:21:15,000 Speaker 1: we recognize that emerging markets are facing really grave challenges 312 00:21:15,119 --> 00:21:20,520 Speaker 1: from these UH surges and sudden stops, and that in response, 313 00:21:20,520 --> 00:21:24,960 Speaker 1: they're using capital controls, they're using foreign exchange intervention, and 314 00:21:25,000 --> 00:21:27,880 Speaker 1: we recognize that, you know, as long as they don't 315 00:21:27,920 --> 00:21:32,200 Speaker 1: completely rely solely on these tools, as long as they 316 00:21:32,320 --> 00:21:35,960 Speaker 1: use you know, standard tools like monetary and fiscal policy 317 00:21:36,000 --> 00:21:39,800 Speaker 1: and exchange rate flexibility, we will be much more open 318 00:21:40,560 --> 00:21:45,480 Speaker 1: to the use of these other tools in certain circumstances. 319 00:21:45,480 --> 00:21:50,320 Speaker 1: So that's that was the kind of twenty twelve, not 320 00:21:50,320 --> 00:21:52,520 Speaker 1: not in a global sense, but in the i MFS 321 00:21:52,560 --> 00:21:57,160 Speaker 1: inside baseball sense, was a big deal. And it so 322 00:21:57,400 --> 00:22:01,240 Speaker 1: our report. You know, it's like looking at the roughly 323 00:22:01,280 --> 00:22:04,119 Speaker 1: the ten years after the i m F made this 324 00:22:04,200 --> 00:22:08,399 Speaker 1: big change and and seeing how well and of the 325 00:22:08,440 --> 00:22:11,440 Speaker 1: i m F has lived up to what it what 326 00:22:11,480 --> 00:22:14,440 Speaker 1: it wanted to do in twelve. So I think that's 327 00:22:14,520 --> 00:22:18,600 Speaker 1: kind of the evolution. I think clearly the global financial 328 00:22:18,640 --> 00:22:22,200 Speaker 1: crisis was a big factor, and now the pandemic is 329 00:22:22,240 --> 00:22:27,800 Speaker 1: another big story. Shuro' I want to bring you in 330 00:22:28,640 --> 00:22:30,600 Speaker 1: to get some of your thoughts or you know, as 331 00:22:30,640 --> 00:22:33,840 Speaker 1: you sort of look back on this period um or 332 00:22:33,840 --> 00:22:38,560 Speaker 1: there any sort of notable sort of country specific incidents 333 00:22:38,680 --> 00:22:41,840 Speaker 1: either where a sort of new tool kit was unveiled 334 00:22:41,920 --> 00:22:45,960 Speaker 1: or there was a failure to properly respond with policy 335 00:22:46,040 --> 00:22:50,000 Speaker 1: leading to crisis. Like which countries sort of or incidents 336 00:22:50,000 --> 00:22:54,840 Speaker 1: sort of stand out as being particularly um educational or 337 00:22:54,960 --> 00:22:59,360 Speaker 1: useful for analytical purposes. Thanks to Joe for having me 338 00:23:00,160 --> 00:23:04,320 Speaker 1: um in this conversation. I think just adding to percaucious 339 00:23:04,400 --> 00:23:08,600 Speaker 1: points um, some of the case country case studies that 340 00:23:08,640 --> 00:23:13,560 Speaker 1: we worked on in our report across the world provided 341 00:23:13,680 --> 00:23:18,200 Speaker 1: us quite a bit of a perspective on how countries 342 00:23:18,280 --> 00:23:22,399 Speaker 1: deal with the issue of capital flow of capital flows 343 00:23:22,440 --> 00:23:27,040 Speaker 1: in gender. So if you take for example India, India's case, 344 00:23:27,720 --> 00:23:30,639 Speaker 1: I think the two thousand thirteen tape of Trantom episode 345 00:23:31,920 --> 00:23:36,600 Speaker 1: was one of the key points where we find in 346 00:23:36,680 --> 00:23:42,120 Speaker 1: our report that the I m F could have responded 347 00:23:42,760 --> 00:23:46,960 Speaker 1: um uh in a in perhaps a better manner to 348 00:23:47,200 --> 00:23:51,879 Speaker 1: the issue of having pre emptive controls. And if you 349 00:23:51,920 --> 00:23:56,840 Speaker 1: take the countries in the subs African region, which is 350 00:23:56,880 --> 00:24:00,000 Speaker 1: another set of countries that we deal in our case studies, 351 00:24:00,960 --> 00:24:07,440 Speaker 1: you also find similar experiences. But I think broadly speaking 352 00:24:08,560 --> 00:24:11,919 Speaker 1: from the E M world, I think it's essentially the 353 00:24:11,960 --> 00:24:19,560 Speaker 1: balance between having a sequence capital account opening to ensure 354 00:24:19,640 --> 00:24:24,960 Speaker 1: capital comes in, but also ensuring that financial stability risks 355 00:24:25,400 --> 00:24:30,840 Speaker 1: are taken care of to the extent that um in 356 00:24:30,960 --> 00:24:33,480 Speaker 1: some of our findings we see the use of preemptive 357 00:24:33,480 --> 00:24:37,800 Speaker 1: capital controls as a sort of a buffer to maintain 358 00:24:37,840 --> 00:24:43,720 Speaker 1: this balance. It's something that would be useful for policymakers 359 00:24:43,920 --> 00:24:48,480 Speaker 1: too kind of think about. And also, you know, wagh 360 00:24:48,480 --> 00:24:51,360 Speaker 1: in a bit more on that, so that the balance 361 00:24:51,440 --> 00:24:57,720 Speaker 1: between having a sequence capital account opening and having preemptive 362 00:24:57,720 --> 00:25:02,040 Speaker 1: controls would would would pro the balance that's needed, especially 363 00:25:02,080 --> 00:25:06,040 Speaker 1: in the emerging market space. So Joe, if I could 364 00:25:06,280 --> 00:25:10,400 Speaker 1: just come in on that, I think what said sort 365 00:25:10,440 --> 00:25:13,679 Speaker 1: of ties into I think the premise of what you 366 00:25:13,760 --> 00:25:18,120 Speaker 1: were quizzing us on also is that you know, foreign 367 00:25:18,160 --> 00:25:21,840 Speaker 1: capital isn't bad. And as part of this report, you know, 368 00:25:21,920 --> 00:25:26,040 Speaker 1: we spoke to i would say, literally a hundred or 369 00:25:26,080 --> 00:25:31,359 Speaker 1: more very senior policy makers around the world, you know, 370 00:25:31,400 --> 00:25:36,640 Speaker 1: in sort of confidential conversations, and I think the overwhelming 371 00:25:36,720 --> 00:25:40,040 Speaker 1: feeling is that they want to remain open to foreign capital. 372 00:25:40,720 --> 00:25:46,280 Speaker 1: So as Siam was saying, kind of paradoxically, they feel 373 00:25:46,320 --> 00:25:50,240 Speaker 1: that having a little having some flexibility to deal with 374 00:25:51,680 --> 00:25:56,359 Speaker 1: extreme situations of surgeries or sudden stops through capital controls 375 00:25:57,160 --> 00:26:00,359 Speaker 1: will actually give them the ability to keep moving towards 376 00:26:00,480 --> 00:26:05,000 Speaker 1: foreign towards more open capital markets, because what they feel 377 00:26:05,080 --> 00:26:11,439 Speaker 1: is that if they literally open up completely without you know, 378 00:26:11,960 --> 00:26:15,560 Speaker 1: these kind of safeguards and there is a financial crisis, 379 00:26:16,840 --> 00:26:21,440 Speaker 1: that actually sets back for them the cause of globalization. 380 00:26:22,280 --> 00:26:26,359 Speaker 1: Within their domestic constituencies. It becomes difficult for them to 381 00:26:26,600 --> 00:26:31,200 Speaker 1: argue within their own political realm that look, let's open 382 00:26:31,280 --> 00:26:33,320 Speaker 1: up to foreign capital. People say, well, look, we just 383 00:26:33,400 --> 00:26:35,560 Speaker 1: had this massive financial crisis. Why why do you want 384 00:26:35,640 --> 00:26:39,800 Speaker 1: us to open up. So, you know, the senior policymakers 385 00:26:39,840 --> 00:26:43,880 Speaker 1: are very much in favor of open capital markets, but 386 00:26:44,720 --> 00:26:47,760 Speaker 1: quite a number of them are saying, look, give us 387 00:26:47,760 --> 00:26:51,480 Speaker 1: this flexibility, we're not going to abuse it. Uh, it's 388 00:26:51,520 --> 00:26:54,040 Speaker 1: not like we're going to just impose capital controls left, 389 00:26:54,080 --> 00:26:58,199 Speaker 1: right and center. We just needed at specific times, and 390 00:26:58,280 --> 00:27:00,520 Speaker 1: we need, frankly I m F a part at those 391 00:27:00,560 --> 00:27:04,119 Speaker 1: specific times. And that will actually help us in the 392 00:27:04,200 --> 00:27:07,800 Speaker 1: long run to keep moving towards more and more open 393 00:27:07,840 --> 00:27:12,720 Speaker 1: capital markets, because our population will see that it's possible 394 00:27:12,800 --> 00:27:17,880 Speaker 1: to keep opening up financial our capital markets without having 395 00:27:18,720 --> 00:27:22,400 Speaker 1: financial crisis. And I think that was the case of 396 00:27:23,240 --> 00:27:27,560 Speaker 1: many many countries that we saw around the world. Just 397 00:27:27,600 --> 00:27:30,720 Speaker 1: to add to pocacious point, I think, you know, the 398 00:27:30,800 --> 00:27:34,600 Speaker 1: IMF also has to be credited in the sense especially 399 00:27:34,600 --> 00:27:39,120 Speaker 1: in countries, say such as substance in substern Africa, where 400 00:27:39,160 --> 00:27:44,760 Speaker 1: it was previously criticized for promoting or or advocating for 401 00:27:44,960 --> 00:27:49,640 Speaker 1: a open capital account, and in recent years the FF 402 00:27:49,760 --> 00:27:54,239 Speaker 1: has been fairly measured in these countries in terms of 403 00:27:54,760 --> 00:28:00,399 Speaker 1: UM advocating for open more open capital markets. To extent 404 00:28:00,520 --> 00:28:03,479 Speaker 1: that you know, one of the findings that we have 405 00:28:04,000 --> 00:28:07,280 Speaker 1: is that we would probably we probably feel that the 406 00:28:07,280 --> 00:28:10,760 Speaker 1: IMF has a little bit more to allow or two 407 00:28:11,880 --> 00:28:14,520 Speaker 1: encourage countries to open up the markets in that region. 408 00:28:15,280 --> 00:28:17,240 Speaker 1: So the the i m F has made a lot 409 00:28:17,240 --> 00:28:22,880 Speaker 1: of effort in recent years to balance its policies, which 410 00:28:22,960 --> 00:28:26,920 Speaker 1: we also highlight in the report. Well, for your report, 411 00:28:27,240 --> 00:28:30,320 Speaker 1: I think you spoke to quite a few people within 412 00:28:30,400 --> 00:28:33,360 Speaker 1: the I m F UM and I guess outside as 413 00:28:33,359 --> 00:28:36,560 Speaker 1: well to get their views. What was the sort of 414 00:28:37,400 --> 00:28:41,320 Speaker 1: general thinking, UM when you came to talk to them, Like, 415 00:28:41,400 --> 00:28:43,960 Speaker 1: what were some of the views that you heard that 416 00:28:43,960 --> 00:28:49,320 Speaker 1: that you remember and that strike you as interesting? I think, yeah, 417 00:28:49,720 --> 00:28:53,160 Speaker 1: we did indeed speak to everyone within the IMF. I think, 418 00:28:53,200 --> 00:28:55,920 Speaker 1: just to make it clear to your listeners, the Independent 419 00:28:55,960 --> 00:28:59,480 Speaker 1: Evaluation Office is sort of part of the IMF, but 420 00:28:59,640 --> 00:29:03,640 Speaker 1: as in name indicates, it's also it stays at arms 421 00:29:03,720 --> 00:29:06,960 Speaker 1: length from the I m F. It. You know, the 422 00:29:07,040 --> 00:29:12,000 Speaker 1: topics we choose to investigate are decided by the office itself. 423 00:29:13,000 --> 00:29:17,280 Speaker 1: We are at arms length from IMF management and it's board, 424 00:29:17,320 --> 00:29:20,800 Speaker 1: so you know, we have considerable freedom to pick the 425 00:29:20,880 --> 00:29:25,880 Speaker 1: topics and in depth report on them through candid conversations 426 00:29:25,920 --> 00:29:29,480 Speaker 1: with IMF staff as well as outside. So I think 427 00:29:29,480 --> 00:29:34,960 Speaker 1: within the IMF, people felt that they had been in 428 00:29:35,000 --> 00:29:39,160 Speaker 1: a sense, you know, sort of given their marching orders 429 00:29:39,160 --> 00:29:43,760 Speaker 1: in twelve and namely that they should be more open 430 00:29:44,280 --> 00:29:47,040 Speaker 1: to the use of capital controls and they should be 431 00:29:47,080 --> 00:29:51,680 Speaker 1: more cautious about just pushing for capital account liberalization. So 432 00:29:52,240 --> 00:29:55,560 Speaker 1: I think most people said they knew those were the 433 00:29:57,160 --> 00:29:59,240 Speaker 1: those were the orders, and they followed them, and we 434 00:29:59,280 --> 00:30:02,680 Speaker 1: found that they allowed them quite well, almost to the 435 00:30:02,680 --> 00:30:06,560 Speaker 1: extent as Shiram was saying, that there was almost a 436 00:30:06,600 --> 00:30:09,280 Speaker 1: sense that they were not willing to take any risks 437 00:30:09,440 --> 00:30:15,760 Speaker 1: in advocating that countries go for increased openness to foreign 438 00:30:15,840 --> 00:30:20,880 Speaker 1: capital So you know, in China and India, some policymakers 439 00:30:20,960 --> 00:30:24,040 Speaker 1: told us that they were poised at different times where 440 00:30:24,080 --> 00:30:28,000 Speaker 1: they could have made a push for more open capital markets, 441 00:30:28,280 --> 00:30:31,480 Speaker 1: you know, given the political setting and the other constraints, 442 00:30:31,480 --> 00:30:35,680 Speaker 1: but the i m F was cautious and following following 443 00:30:35,680 --> 00:30:39,680 Speaker 1: the orders twenty twelve orders outside d i m F 444 00:30:39,760 --> 00:30:43,160 Speaker 1: and we spoke to senior policymakers, they also, as Sam said, 445 00:30:43,160 --> 00:30:47,080 Speaker 1: gave the IMF considerable credit for, you know, for in 446 00:30:47,080 --> 00:30:51,720 Speaker 1: a sense fixing what the criticisms had been twenty years 447 00:30:51,720 --> 00:30:54,560 Speaker 1: ago after the ancient crisis. So in that sense of 448 00:30:56,240 --> 00:30:59,360 Speaker 1: reframing of the i m F position was considered as 449 00:30:59,400 --> 00:31:01,959 Speaker 1: moving it, as having moved it to a good place. 450 00:31:02,880 --> 00:31:05,160 Speaker 1: But I think there is a feeling now that you know, 451 00:31:05,240 --> 00:31:08,560 Speaker 1: even in the short space of less than ten years, 452 00:31:09,160 --> 00:31:15,440 Speaker 1: things have evolved and that countries need quite a bit 453 00:31:15,480 --> 00:31:18,200 Speaker 1: more policy space to deal with the challenges that they 454 00:31:18,240 --> 00:31:22,720 Speaker 1: are facing. In our report, at least, we take these 455 00:31:22,800 --> 00:31:26,720 Speaker 1: views seriously and advocate that that on the one hand, 456 00:31:27,800 --> 00:31:30,800 Speaker 1: you know, the IMF should not back away completely from 457 00:31:30,840 --> 00:31:34,840 Speaker 1: the view that capital open capital markets are good. It 458 00:31:34,880 --> 00:31:39,480 Speaker 1: should actually be perhaps even a little more aggressive on 459 00:31:40,560 --> 00:31:45,320 Speaker 1: advocating capital open capital markets as a long run goal, 460 00:31:46,240 --> 00:31:49,440 Speaker 1: but at the same time it should be even a 461 00:31:49,440 --> 00:31:52,040 Speaker 1: little more open to the use of controls when they 462 00:31:52,040 --> 00:31:56,840 Speaker 1: are needed. Um. I mean, one example is is Iceland 463 00:31:56,880 --> 00:31:59,440 Speaker 1: in twenty six you know, Iceland, as you know, had 464 00:31:59,520 --> 00:32:05,240 Speaker 1: just gone through an enormous crisis in two thousand two nine. 465 00:32:06,840 --> 00:32:11,440 Speaker 1: In sixteen, they wanted to impose some capital controls because 466 00:32:12,120 --> 00:32:15,080 Speaker 1: there was a surge of foreign capital. The I m 467 00:32:15,160 --> 00:32:19,520 Speaker 1: F said, well, yes, you folks are experiencing a surge, 468 00:32:19,600 --> 00:32:21,720 Speaker 1: but look, it's not as big as what you had 469 00:32:22,760 --> 00:32:26,200 Speaker 1: during the global financial crisis, and so look, you really 470 00:32:26,320 --> 00:32:30,440 Speaker 1: perhaps should not be imposing these controls. And the Icelandic 471 00:32:30,480 --> 00:32:33,560 Speaker 1: authority said, that's precisely the point. We don't want to 472 00:32:33,560 --> 00:32:37,840 Speaker 1: wait till what happened last time again happens. You know, 473 00:32:37,960 --> 00:32:40,280 Speaker 1: this time we agree with you. The surge is not 474 00:32:40,360 --> 00:32:43,920 Speaker 1: as big, but you know, frankly, we'd rather impose the 475 00:32:44,000 --> 00:32:47,640 Speaker 1: controls now preemptively so that it doesn't get to the 476 00:32:48,040 --> 00:32:51,120 Speaker 1: repeat of the previous crisis. So that's the sense in 477 00:32:51,160 --> 00:32:54,160 Speaker 1: which you know, the I MF needs to be still 478 00:32:54,200 --> 00:32:58,840 Speaker 1: a little more open to the use of these sort 479 00:32:58,840 --> 00:33:04,000 Speaker 1: of preemptive capital controls, recognizing that policymakers are have bought 480 00:33:04,040 --> 00:33:07,560 Speaker 1: into the idea of open capital markets over the long run, 481 00:33:08,320 --> 00:33:12,040 Speaker 1: and that they're not going to use capital controls indiscriminately. 482 00:33:13,000 --> 00:33:16,320 Speaker 1: That's something else that our report found. When we did 483 00:33:16,320 --> 00:33:20,320 Speaker 1: a very thorough survey of actual use of capital controls, 484 00:33:20,320 --> 00:33:23,120 Speaker 1: we found that they were not that frequent. It's just 485 00:33:23,200 --> 00:33:26,880 Speaker 1: that when they are needed, countries want to use them. 486 00:33:26,920 --> 00:33:30,440 Speaker 1: So let's talk about that what you just said, when 487 00:33:30,480 --> 00:33:33,400 Speaker 1: they're needed, because I mean, I think I heard one 488 00:33:33,520 --> 00:33:36,880 Speaker 1: time the people said, oh, the first rule of capital controls. 489 00:33:37,520 --> 00:33:40,760 Speaker 1: You don't talk about capital controls because if you hint 490 00:33:40,800 --> 00:33:43,040 Speaker 1: at the idea that you're going to lock money in 491 00:33:43,240 --> 00:33:45,240 Speaker 1: or out of the country, then suddenly everyone tries to 492 00:33:45,320 --> 00:33:47,280 Speaker 1: raise against it. So you can't just like sort of 493 00:33:47,520 --> 00:33:50,280 Speaker 1: wait till the crisis hits. And as you mentioned in 494 00:33:50,280 --> 00:33:52,800 Speaker 1: the beginning of the chat, you know, it's sort of 495 00:33:52,840 --> 00:33:56,600 Speaker 1: like some countries, even developed ones, have sort of very 496 00:33:56,720 --> 00:34:00,440 Speaker 1: light versions of capital controls. You mentioned us Alia in 497 00:34:00,480 --> 00:34:03,400 Speaker 1: Canada taking some or New Zealand taking some efforts to 498 00:34:03,520 --> 00:34:08,600 Speaker 1: curve their housing markets. So what are the parameters or 499 00:34:08,680 --> 00:34:12,839 Speaker 1: guide posts you look at or that one looks at. 500 00:34:13,239 --> 00:34:15,359 Speaker 1: So that a country or the I m F can 501 00:34:15,360 --> 00:34:20,880 Speaker 1: evaluate when capital controls are appropriate, so that these decisions 502 00:34:20,960 --> 00:34:24,800 Speaker 1: are not being made once the crisis has already started, 503 00:34:24,960 --> 00:34:27,839 Speaker 1: and even the mere chatter of capital controls would only 504 00:34:27,840 --> 00:34:30,200 Speaker 1: make things work. Yeah, So I mean there are a 505 00:34:30,280 --> 00:34:34,040 Speaker 1: number of principles one can use. First, I think, as 506 00:34:34,080 --> 00:34:41,399 Speaker 1: your question suggested, um, you know, controls on outflows are 507 00:34:41,440 --> 00:34:44,719 Speaker 1: always going to be more difficult than controls on inflows. 508 00:34:44,800 --> 00:34:48,239 Speaker 1: So I mean you have to be thinking of this 509 00:34:48,360 --> 00:34:52,239 Speaker 1: dynamic game and and and and saying, well, if I 510 00:34:52,280 --> 00:34:54,920 Speaker 1: don't want to be in trouble during the outflows, what 511 00:34:55,040 --> 00:34:59,239 Speaker 1: do I have to do now? So the question is 512 00:34:59,280 --> 00:35:01,759 Speaker 1: when the third you're starting, that's when you have to 513 00:35:01,800 --> 00:35:05,879 Speaker 1: think about what is it that I'm going to tell 514 00:35:06,000 --> 00:35:08,880 Speaker 1: foreign investors and what is it that I'm going to 515 00:35:08,920 --> 00:35:13,239 Speaker 1: be frank and clear with them about. So that's the 516 00:35:13,280 --> 00:35:16,600 Speaker 1: stage when you can tell them, look, folks, we welcome 517 00:35:16,680 --> 00:35:19,879 Speaker 1: your your capital. We need it. It's going to help us, 518 00:35:20,880 --> 00:35:25,319 Speaker 1: but it's not going to help us if you leave 519 00:35:25,360 --> 00:35:28,040 Speaker 1: at the first sign of trouble or or anything else. 520 00:35:28,040 --> 00:35:33,080 Speaker 1: So when it's coming in is when you can impose 521 00:35:33,920 --> 00:35:38,240 Speaker 1: some conditions on the money coming in. So that's that. 522 00:35:38,239 --> 00:35:41,040 Speaker 1: That's what I was talking about, Like, that's the stage 523 00:35:41,040 --> 00:35:43,719 Speaker 1: where you could tell people, look, if you bring in 524 00:35:43,760 --> 00:35:46,439 Speaker 1: money for three months, here's the tax. If you're bring 525 00:35:46,440 --> 00:35:49,680 Speaker 1: in money for two years, here's the lower tax. So 526 00:35:49,719 --> 00:35:52,400 Speaker 1: if you're clear with them at the outset about what 527 00:35:52,560 --> 00:35:58,440 Speaker 1: the conditions are that that would apply to them, that 528 00:35:58,640 --> 00:36:01,319 Speaker 1: is something that you can do. And then at that 529 00:36:01,400 --> 00:36:05,840 Speaker 1: stage people will have less of a chance to complain 530 00:36:05,920 --> 00:36:08,680 Speaker 1: and say, oh, you're imposing capital controls. You said, no, look, 531 00:36:08,719 --> 00:36:11,160 Speaker 1: we told you this was the tax differential tax rate 532 00:36:11,200 --> 00:36:14,600 Speaker 1: that was going to prevail based on maturity, and we 533 00:36:14,640 --> 00:36:17,640 Speaker 1: are just imposing the rules. So you know, as part 534 00:36:17,680 --> 00:36:22,200 Speaker 1: of this report, we actually talked to rating agencies and 535 00:36:22,200 --> 00:36:26,680 Speaker 1: and other folks in global financial markets and they said 536 00:36:26,719 --> 00:36:30,920 Speaker 1: that obviously what investors hate is uncertainty about what the 537 00:36:31,040 --> 00:36:35,400 Speaker 1: rules are going to be. So if if a country 538 00:36:35,480 --> 00:36:40,319 Speaker 1: is sort of upfront about what the regime is going 539 00:36:40,360 --> 00:36:42,959 Speaker 1: to be under which people can move money in and out, 540 00:36:44,560 --> 00:36:48,600 Speaker 1: investors can live with even a somewhat more restrictive regime 541 00:36:48,680 --> 00:36:53,440 Speaker 1: that says, look, I'm sorry, but the tax rate on 542 00:36:53,520 --> 00:36:57,600 Speaker 1: moving money in and out over short durations is going 543 00:36:57,640 --> 00:36:59,920 Speaker 1: to be much higher than if you bring in my 544 00:37:00,200 --> 00:37:04,000 Speaker 1: over long durations. So I think that's something that's very 545 00:37:04,000 --> 00:37:07,440 Speaker 1: important for e M s to keep in mind. They 546 00:37:07,440 --> 00:37:11,359 Speaker 1: do need the foreign capital, but they should have a 547 00:37:11,400 --> 00:37:16,719 Speaker 1: fair bit of transparency in the regime, uh and not 548 00:37:17,000 --> 00:37:22,680 Speaker 1: really subject that regime to you know, frequent and arbitrary changes. 549 00:37:22,760 --> 00:37:26,080 Speaker 1: I think that's what foreign investors say. It is the uncertainty. 550 00:37:26,360 --> 00:37:29,480 Speaker 1: I mean that said, there can be always severe stresses 551 00:37:29,600 --> 00:37:34,520 Speaker 1: where during outflaw situations, countries may need to do what 552 00:37:34,560 --> 00:37:37,480 Speaker 1: they what they need to do. And I think to 553 00:37:37,520 --> 00:37:41,279 Speaker 1: the extent you can predict the course of events, you 554 00:37:41,280 --> 00:37:44,920 Speaker 1: should be transparent and clear with foreign investors about the regime. 555 00:37:46,120 --> 00:37:50,279 Speaker 1: But as we found, for instance, in the situation that 556 00:37:51,440 --> 00:37:55,000 Speaker 1: Shiram was describing, you know, India had no idea that 557 00:37:55,040 --> 00:37:59,200 Speaker 1: the taper tantrum would have such a massive impact on 558 00:37:59,280 --> 00:38:02,880 Speaker 1: its capital outflows. There's no way that India could have 559 00:38:02,920 --> 00:38:06,600 Speaker 1: credibly told people ahead of time, look, we're not going 560 00:38:06,640 --> 00:38:09,279 Speaker 1: to touch you. It was such a severe crisis. You 561 00:38:09,280 --> 00:38:12,959 Speaker 1: have the rupie depreciation depreciating like crazy in a three 562 00:38:12,960 --> 00:38:16,600 Speaker 1: month period. I think there are always situations like that 563 00:38:16,719 --> 00:38:20,280 Speaker 1: where countries have to do what's in their best interests. 564 00:38:20,320 --> 00:38:23,000 Speaker 1: And often that's when they're looking for support from the 565 00:38:23,040 --> 00:38:26,040 Speaker 1: I m F to say, look this this is this 566 00:38:26,080 --> 00:38:29,600 Speaker 1: is a severe situation. The country will be using some 567 00:38:29,640 --> 00:38:33,200 Speaker 1: capital controls, and I think we think that this is 568 00:38:33,200 --> 00:38:37,680 Speaker 1: a good situation for it. You know China, you know, 569 00:38:38,120 --> 00:38:42,560 Speaker 1: severe stresses use capital controls. And again would have looked 570 00:38:43,840 --> 00:38:49,680 Speaker 1: who was looking for strong IMF support. Just to add 571 00:38:49,800 --> 00:38:53,160 Speaker 1: to that joke, I think there's also reflects on a 572 00:38:53,280 --> 00:38:58,200 Speaker 1: bigger point of both institutional capacity and arbitredness. With this 573 00:38:58,320 --> 00:39:00,799 Speaker 1: controls and themselves they work are just trying to say, 574 00:39:00,880 --> 00:39:05,400 Speaker 1: is that we would our investors are more than happy 575 00:39:05,480 --> 00:39:09,279 Speaker 1: to have a consistent set of policies which they are 576 00:39:10,040 --> 00:39:13,200 Speaker 1: you know, attuned to. So the challenge for e m 577 00:39:13,239 --> 00:39:16,440 Speaker 1: s is to have a set of policies which is consistent, 578 00:39:17,320 --> 00:39:23,520 Speaker 1: not arbitrary, but yet providing the necessary confidence to the market. 579 00:39:23,640 --> 00:39:26,680 Speaker 1: So I think from an emerging market's point of view 580 00:39:27,400 --> 00:39:31,120 Speaker 1: dealing with this crisis is that's basically the you know, 581 00:39:31,520 --> 00:39:36,960 Speaker 1: besides the balance, the key is to get consistency in 582 00:39:36,960 --> 00:39:56,440 Speaker 1: their policy making. I have a slightly weird question, but 583 00:39:57,200 --> 00:40:01,560 Speaker 1: to to what extent should we be viewed doing this 584 00:40:01,719 --> 00:40:06,560 Speaker 1: new attitude towards capital controls as a sort of reflection 585 00:40:07,760 --> 00:40:11,800 Speaker 1: of I guess, a growing recognition that there are certain 586 00:40:11,840 --> 00:40:16,000 Speaker 1: parts of globalization that might not be desired. So we've 587 00:40:16,040 --> 00:40:18,799 Speaker 1: seen this in various avenues of life, but I mean 588 00:40:18,880 --> 00:40:21,920 Speaker 1: trade restrictions would be the obvious one. We've seen a 589 00:40:22,000 --> 00:40:25,760 Speaker 1: number of countries institute trade barriers of one or another 590 00:40:25,840 --> 00:40:32,319 Speaker 1: to protect their domestic economies. Is embracing capital controls basically 591 00:40:32,400 --> 00:40:38,279 Speaker 1: another way of controlling the globalized economy and trying to 592 00:40:38,360 --> 00:40:42,279 Speaker 1: make it work for you better. That's that's not a 593 00:40:42,320 --> 00:40:45,560 Speaker 1: weird angle at all to me. That that is, you've 594 00:40:45,600 --> 00:40:49,080 Speaker 1: gotten to the essence of it, I think, which is, yes, 595 00:40:49,160 --> 00:40:53,880 Speaker 1: you know, globalization is wonderful. It works for the average person, 596 00:40:54,000 --> 00:40:57,880 Speaker 1: It works for most of us most of the time. 597 00:40:57,920 --> 00:41:03,080 Speaker 1: But clearly there are segments of the population too which 598 00:41:03,080 --> 00:41:07,000 Speaker 1: are not seeing the benefits or are not convinced of 599 00:41:07,040 --> 00:41:09,600 Speaker 1: the benefits. So that's exactly right. I mean, I think, 600 00:41:10,560 --> 00:41:14,680 Speaker 1: as you said, we're seeing this with trade, which I 601 00:41:14,680 --> 00:41:19,480 Speaker 1: feel is you know, really quite beneficial to the large 602 00:41:19,960 --> 00:41:23,600 Speaker 1: majority of people in most countries. But I think we're 603 00:41:23,640 --> 00:41:28,799 Speaker 1: seeing this particularly with financial globalization. I think people are 604 00:41:28,840 --> 00:41:35,160 Speaker 1: simply not seeing the benefits that the widespread benefits across 605 00:41:35,239 --> 00:41:40,160 Speaker 1: their societies of unfettered flow of foreign capital. And I 606 00:41:40,200 --> 00:41:46,840 Speaker 1: think I think paradoxically trade is getting blamed for some 607 00:41:47,000 --> 00:41:49,600 Speaker 1: of the sense of financial globalization. I mean, I think 608 00:41:49,640 --> 00:41:54,040 Speaker 1: these are siblings, but the wrong sibling is is drawing 609 00:41:54,040 --> 00:41:57,560 Speaker 1: the blame. I think, you know, people like Danny Roderick 610 00:41:57,640 --> 00:42:00,840 Speaker 1: have talked about this and called it sort of hyper globalization, 611 00:42:01,560 --> 00:42:04,600 Speaker 1: namely that we've taken a good thing and pushed it 612 00:42:04,640 --> 00:42:10,520 Speaker 1: to a point where, uh, it's the benefits are not evident, 613 00:42:10,600 --> 00:42:13,080 Speaker 1: some people are losing out, and we are seeing a backlash. 614 00:42:13,239 --> 00:42:15,480 Speaker 1: And I think this goes a little bit to what 615 00:42:15,560 --> 00:42:20,359 Speaker 1: I was saying, that it actually allowing some flexibility in 616 00:42:20,440 --> 00:42:25,160 Speaker 1: having countries stepped back a little bit from globalization is 617 00:42:25,200 --> 00:42:29,520 Speaker 1: paradoxically the way that we will keep moving ahead on it, 618 00:42:29,840 --> 00:42:34,920 Speaker 1: because otherwise the backlash will will actually keep us from advancing. 619 00:42:35,920 --> 00:42:40,000 Speaker 1: And and as as Tracy said, we're seeing it in trade. Um, 620 00:42:40,120 --> 00:42:43,040 Speaker 1: we did see a bit against financial globalization also, you know, 621 00:42:43,120 --> 00:42:45,440 Speaker 1: with the kind of the Occupy Wall Street movement and 622 00:42:45,480 --> 00:42:49,279 Speaker 1: the one per centers and all that. I think that's 623 00:42:49,320 --> 00:42:54,160 Speaker 1: a recognition that many people are not seeing how extreme 624 00:42:54,239 --> 00:42:59,279 Speaker 1: financialization or hyper globalization is actually benefiting them. I like that. 625 00:42:59,480 --> 00:43:02,400 Speaker 1: I like that phrase that you use. Siblings and so this, 626 00:43:02,640 --> 00:43:06,200 Speaker 1: you know, and we think, I remember the late nineties 627 00:43:06,239 --> 00:43:10,320 Speaker 1: and there's uh just so much optimism about free trade 628 00:43:10,680 --> 00:43:16,200 Speaker 1: and international investments and opening up emerging markets and so forth. 629 00:43:16,960 --> 00:43:19,520 Speaker 1: And your view is like, we can have trade, and 630 00:43:19,560 --> 00:43:23,640 Speaker 1: we can have the benefits of trade, even if we 631 00:43:23,719 --> 00:43:28,120 Speaker 1: sort of even if country is adopted perhaps more conservative 632 00:43:28,120 --> 00:43:31,279 Speaker 1: and cautious view on the sort of the financial from 633 00:43:31,320 --> 00:43:34,960 Speaker 1: the financial perspective. Yeah, exactly. I think I think some 634 00:43:35,080 --> 00:43:39,160 Speaker 1: amount of financial globalization has to proceed to back up 635 00:43:39,200 --> 00:43:42,560 Speaker 1: the increased trade links, but it doesn't have to be 636 00:43:42,840 --> 00:43:47,560 Speaker 1: necessarily to the extent that we have and particularly hot money. 637 00:43:47,600 --> 00:43:49,640 Speaker 1: And again I go back to stan Fisher. I mean, 638 00:43:50,400 --> 00:43:53,719 Speaker 1: you know, if stan Fisher, when he was Governor of 639 00:43:53,760 --> 00:43:57,680 Speaker 1: the Bank of Israel couldn't see what benefit he was 640 00:43:57,719 --> 00:44:02,480 Speaker 1: getting from short term hot money flows, we all have 641 00:44:02,520 --> 00:44:05,920 Speaker 1: to ask ourselves. I mean, you know, what what is 642 00:44:05,960 --> 00:44:09,440 Speaker 1: it that these flows are doing, and if they are 643 00:44:09,480 --> 00:44:12,440 Speaker 1: bringing benefits, I think it's it's something that needs to 644 00:44:12,480 --> 00:44:17,600 Speaker 1: be demonstrated. So yeah, I think even for the benefits 645 00:44:17,640 --> 00:44:20,880 Speaker 1: to you know, like what percosh mentions for the benefits 646 00:44:20,920 --> 00:44:23,960 Speaker 1: to flow through. For people to recognize that, I think 647 00:44:23,960 --> 00:44:27,600 Speaker 1: you probably need to take a step back and and look, 648 00:44:27,840 --> 00:44:31,160 Speaker 1: how you know, we need to evolve this into a 649 00:44:31,239 --> 00:44:37,120 Speaker 1: more kind of a sustainable proposition so that the benefits, 650 00:44:37,400 --> 00:44:41,600 Speaker 1: you know, is seeing by the people who are who 651 00:44:41,600 --> 00:44:45,239 Speaker 1: are consuming. So so, just to go back to sort 652 00:44:45,280 --> 00:44:47,360 Speaker 1: of the theory that we talked about at the start 653 00:44:47,400 --> 00:44:51,120 Speaker 1: about why foreign capital helps, you know, one way foreign 654 00:44:51,120 --> 00:44:55,760 Speaker 1: capital helps is that you know, it matches foreign capital 655 00:44:55,840 --> 00:45:02,120 Speaker 1: to deserving recipients within within the country. But what about 656 00:45:02,120 --> 00:45:05,200 Speaker 1: a country where a large fraction of the people don't 657 00:45:05,239 --> 00:45:09,840 Speaker 1: have bank accounts, they're not really plugged into any system 658 00:45:09,960 --> 00:45:13,839 Speaker 1: where they could draw on on this foreign capital. And 659 00:45:13,880 --> 00:45:16,000 Speaker 1: that's some of the work, to its credit, that the 660 00:45:16,000 --> 00:45:19,600 Speaker 1: I m F has done is on financial inclusion, and 661 00:45:20,400 --> 00:45:24,560 Speaker 1: that has led to the recognition that, gum, yes, we 662 00:45:24,640 --> 00:45:29,600 Speaker 1: thought foreign capital should be benefiting lots of people, but hey, 663 00:45:29,640 --> 00:45:32,399 Speaker 1: what about these folks who are just completely unplugged from 664 00:45:32,440 --> 00:45:35,880 Speaker 1: the financial system in their domestic economies. How how in 665 00:45:35,920 --> 00:45:38,240 Speaker 1: the heck did we think they are going to benefit? 666 00:45:38,719 --> 00:45:40,480 Speaker 1: And so, you know, that's that's been part of the 667 00:45:40,480 --> 00:45:43,800 Speaker 1: rethinking is to say, look, guys, we need to be 668 00:45:44,280 --> 00:45:47,239 Speaker 1: not just spouting the theory. We need to think about how, 669 00:45:48,280 --> 00:45:50,960 Speaker 1: you know, people on the ground are going to benefit 670 00:45:51,000 --> 00:45:53,640 Speaker 1: from this foreign capital. So I think that's that's been 671 00:45:53,680 --> 00:45:58,640 Speaker 1: a very salutary lesson both of you. Percash and Sharon, 672 00:45:58,840 --> 00:46:01,080 Speaker 1: thank you so much for joining us. Thanks guys, thanks show, 673 00:46:01,120 --> 00:46:03,520 Speaker 1: Thanks Tracy. I've always enjoyed this podcast. Good to be 674 00:46:03,560 --> 00:46:06,200 Speaker 1: on it. Thanks, that means a lot, so glad to 675 00:46:06,200 --> 00:46:29,920 Speaker 1: have you both. That was a really enjoyable conversation, interesting topic. 676 00:46:30,000 --> 00:46:31,799 Speaker 1: You know, it got me what we were thinking talking 677 00:46:31,800 --> 00:46:34,480 Speaker 1: about at the end. You know, it definitely reminded me 678 00:46:34,520 --> 00:46:39,080 Speaker 1: of our conversation earlier in the year with Matt Klein, 679 00:46:39,880 --> 00:46:43,640 Speaker 1: the author of Trade Wars are classmar just this idea 680 00:46:43,880 --> 00:46:49,400 Speaker 1: of unfettered trade, or particularly unfettered flow of capital, exacerbating 681 00:46:50,000 --> 00:46:53,920 Speaker 1: domestic inequalities and creating a situation which you end up 682 00:46:53,960 --> 00:46:56,400 Speaker 1: with a large portion of the public that just doesn't 683 00:46:56,440 --> 00:47:01,040 Speaker 1: see the benefit of sort of like openness to the world. Yeah, 684 00:47:01,080 --> 00:47:05,319 Speaker 1: absolutely right. It's sort of the financialization flip side of 685 00:47:05,400 --> 00:47:08,560 Speaker 1: the like hard flow of goods, isn't it. But I 686 00:47:08,600 --> 00:47:12,480 Speaker 1: thought that whole discussion was really really interesting I thought, 687 00:47:13,200 --> 00:47:15,480 Speaker 1: I don't know, everyone has this idea of the I 688 00:47:15,640 --> 00:47:20,480 Speaker 1: m F as this really like slow and lumbering bureaucracy 689 00:47:20,480 --> 00:47:23,920 Speaker 1: that never really changes its mind. But it's interesting to 690 00:47:24,080 --> 00:47:28,319 Speaker 1: see the beginnings of a policy shift playing out in 691 00:47:28,400 --> 00:47:31,479 Speaker 1: real time. It's definitely a slow process, but it does 692 00:47:31,520 --> 00:47:34,960 Speaker 1: seem to be happening. Yeah, it seems to be happening. 693 00:47:35,000 --> 00:47:38,160 Speaker 1: And the framework or the way and your question really 694 00:47:38,200 --> 00:47:40,880 Speaker 1: got at it. But the way they talked about is coherent. 695 00:47:41,000 --> 00:47:43,400 Speaker 1: It's like they're not going the I m F is 696 00:47:43,440 --> 00:47:46,160 Speaker 1: not any time going to give up on a general 697 00:47:46,239 --> 00:47:49,439 Speaker 1: view that globalization is good, and free trade is good 698 00:47:49,440 --> 00:47:53,640 Speaker 1: and even open capital accounts are good. But tactically to 699 00:47:53,760 --> 00:47:57,200 Speaker 1: get from here to there, if you move too fast, 700 00:47:57,320 --> 00:48:03,200 Speaker 1: if you if countries don't have the tools to prevent crises, 701 00:48:03,280 --> 00:48:06,560 Speaker 1: then you'll never like get to that at endpoint. Yeah, 702 00:48:07,080 --> 00:48:09,560 Speaker 1: I mean, I think there's a growing recognition that there 703 00:48:09,600 --> 00:48:14,319 Speaker 1: if you're going to pursue globalization for all, thinking that 704 00:48:14,360 --> 00:48:17,680 Speaker 1: it's going to benefit everyone, if there are pockets that 705 00:48:17,880 --> 00:48:22,520 Speaker 1: aren't seeing those benefits, that are being challenged, it's okay 706 00:48:22,560 --> 00:48:26,720 Speaker 1: to do sort of pinpoint policies to address what those 707 00:48:26,760 --> 00:48:30,080 Speaker 1: issues are. It doesn't mean you've completely backed away from 708 00:48:30,440 --> 00:48:35,280 Speaker 1: liberalizing the current account or free trade altogether, which again 709 00:48:35,400 --> 00:48:38,800 Speaker 1: is like, is a huge policy shift. Well, Tracy cannot 710 00:48:38,840 --> 00:48:43,080 Speaker 1: compliment you on something. Oh, no, one. I was really 711 00:48:43,120 --> 00:48:46,080 Speaker 1: impressed that on the fly you were able to remember 712 00:48:46,120 --> 00:48:49,680 Speaker 1: the three the three corners of the tried Lemma or 713 00:48:49,719 --> 00:48:52,560 Speaker 1: the impossible trinity as soon as you said, like, I 714 00:48:52,600 --> 00:48:55,680 Speaker 1: feel like it wasn't on the fly. Oh were you 715 00:48:55,760 --> 00:48:57,880 Speaker 1: were you googling it at the time. It wasn't on 716 00:48:57,920 --> 00:49:00,319 Speaker 1: the I wrote it down. Well, I was, no, I 717 00:49:00,360 --> 00:49:03,000 Speaker 1: wrote it down before we had this conversation. You knew 718 00:49:03,000 --> 00:49:05,480 Speaker 1: it was going to come up, right. I really thought 719 00:49:05,480 --> 00:49:09,319 Speaker 1: that you just sort of extemporaneously remembered the three, uh, 720 00:49:09,480 --> 00:49:12,239 Speaker 1: the three. I'm still impressed that you, like at the 721 00:49:12,280 --> 00:49:14,239 Speaker 1: beginning of the conversation that you knew to have it. 722 00:49:14,320 --> 00:49:16,560 Speaker 1: I'm not quite as impressed that you like wrote it 723 00:49:16,600 --> 00:49:19,479 Speaker 1: down and like googled it beforehand. But it was still 724 00:49:19,520 --> 00:49:23,359 Speaker 1: smart to anticipate that we were going to go there 725 00:49:23,480 --> 00:49:25,440 Speaker 1: to have them at your disposal, And the way you 726 00:49:25,480 --> 00:49:27,200 Speaker 1: said it, it it kind of sounded like you were like 727 00:49:27,320 --> 00:49:29,160 Speaker 1: thinking about it at the time. So it's just well done. 728 00:49:29,480 --> 00:49:32,239 Speaker 1: That's because I was desperately searching for my notes to 729 00:49:32,400 --> 00:49:35,160 Speaker 1: find the last one. Um, no, okay, maybe I shouldn't 730 00:49:35,160 --> 00:49:37,840 Speaker 1: have said anything. Yes, Joe, I remembered it and you 731 00:49:37,880 --> 00:49:40,960 Speaker 1: know it's all in my head. Okay, shall we leave 732 00:49:40,960 --> 00:49:44,120 Speaker 1: it there? Yeah, let's leave it there. Okay. This has 733 00:49:44,160 --> 00:49:47,880 Speaker 1: been another episode of the All Thoughts Podcast. I'm Tracy Alloway. 734 00:49:47,960 --> 00:49:50,680 Speaker 1: You can follow me on Twitter at Tracy Alloway and 735 00:49:50,719 --> 00:49:52,759 Speaker 1: I'm Joe wi isn't Thal. You could follow me on 736 00:49:52,800 --> 00:49:56,160 Speaker 1: Twitter at the Stalwork and you should go check out 737 00:49:56,200 --> 00:49:59,680 Speaker 1: the report from our guests. There are two of the 738 00:50:00,000 --> 00:50:05,040 Speaker 1: tributors the I M F Advice on Capital Flows Evaluation Report. 739 00:50:05,360 --> 00:50:08,360 Speaker 1: I want to thank our guests Perkash lung Ghani and 740 00:50:08,520 --> 00:50:11,920 Speaker 1: Shi ram Bala Supermanion, and be sure to follow our 741 00:50:11,960 --> 00:50:16,239 Speaker 1: producer Laura Carlson. She's at Laura M. Carlson. Followed the 742 00:50:16,239 --> 00:50:20,319 Speaker 1: Bloomberg head of podcast, Francesca Levi at Francesca Today and 743 00:50:20,480 --> 00:50:24,080 Speaker 1: check out all of our podcasts under the handle at podcast. 744 00:50:24,400 --> 00:50:25,160 Speaker 1: Thanks for listening.