UK Economic Environment: Impact of CLCM & Capital Account Openness
In the UK, the approach to managing capital flows involves supporting open but safe capital inflows to benefit the economy. This includes implementing macro and structural policies to mitigate volatility and systemic risks associated with capital flows. Additionally, macro-prudential and capital flow management measures play a crucial role in maintaining financial stability. Explore the UK's reservations and strategies for addressing capital flow challenges.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author.If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
You are allowed to download the files provided on this website for personal or commercial use, subject to the condition that they are used lawfully. All files are the property of their respective owners.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author.
E N D
Presentation Transcript
The impact of CLCM in the UK economic environment Michael Williams
UK Capital Account Openness Aizenman, Joshua, Menzie D. Chinn, and Hiro Ito (2013). "The 'Impossible Trinity' Hypothesis in an Era of Global Imbalances: Measurement and Testing," Review of International Economics, 21(3), 447 458(August 2013)
UK approach to managing capital flows The UK supports open but safe capital flows Capital inflows potentially provide a range of benefits to the economy so the goal should be to make an open global financial system safer.
Macro and structural policies conventional wisdom is that standard macroeconomic policies are the first line of defence against capital flow volatility. Faced with a surge of inflows use combination of : looser monetary policy, tighter fiscal policy and exchange rate appreciation vice versa in face of capital outflow pressure. Role of foreign exchange reserves and private sector s gross external assets. Deepening and broadening of domestic capital markets A diversified domestic investor and instrument base
Macro prudential and capital flow management measures Are sound macro and structural measures are sufficient? Countries may also need macro prudential tools that address systemic risk to target the build-up of systemic vulnerabilities In general, these instruments do not discriminate explicitly between residents and non- residents Macro prudential instruments are useful in mitigating systemic risk from volatile capital flows. May also need prudential tools that directly address excessive volatility in capital inflows. But, contentious if it is thought they are used to manipulate the exchange rate rather than to deal with a well-defined financial stability risk. Accept circumstances when measures may be needed temporarily to avoid clear financial stability risks. But we need clear global rules of the road
UK Reservations *List A, Direct investment: I/A : In the country concerned by non-residents. Remark: The reservation applies only to: i) airlines established in the country that must be majority owned and effectively controlled by EU states and/or nationals of EU states, unless otherwise provided for through an international agreement to which the EU is a signatory; ii) investment in certain broadcasting licences (including, in particular, commercial television, teletext and radio licence) other than by nationals of, or enterprises originating in, EU member countries; iii) acquisition of United Kingdom flag vessels, except through an enterprise incorporated in the United Kingdom; iv) the extent that under EU Directive 85/611/EEC, a depository of an undertaking for collective investment in transferable securities (UCITS) must either have its registered office in the same EU country as that of the undertaking or be established in the EU country if its registered office is in another EU country.
UK regulations Airlines Governed by International Air Transport Agreement Broadcasting - EU rules but also specific public sector broadcaster BBC (an exception under UK competition law media public interest test). Acquisition of UK flag vessels historical legacy of concerns to ensure size of Britsh merchant fleet. restrictions on access to international trades are prohibited in law: EU Council Regulation 4055/86 requires the international trades of EU Member States to be open to ships of any flag; and OECD Shipping Agreement of 1987 commits OECD countries to the same policy UCITS EU Directive to harmonise national rules in terms of authorisation, structure, supervision, disclosure and business within EU
Reservations relating to UK overseas territories Reservations concerning operations between residents of Bermuda and non-residents Reservations concerning operations between residents of the Channel Islands and non-residents Reflects self-governance of territories UK represents territories at OECD
Looking ahead Continue to supports open but safe capital flows Challenges of Brexit UK will remain global financial market, open to investors
