During the recent decades, many countries decided to get access to international financial markets by liberalizing their capital accounts. As we will see in this paper, the issues of liberalization are very complex. Many different areas like, for example, growth, inflation or the labor market are affected by it. For some areas, empirical research supports theory and delivers sustainable and significant results. For others, theory is inconsistent or not supported by evidence from the real world. Some special ones, like for instance welfare or productivity, even show that it is important to split up the results to see whose welfare is increased or which’s branch productivity is affected. Another interesting point is the connection between crises and capital account liberalization. Due to the financial crises that occurred in the aftermath of liberalization the concept has been controversially debated by academics for a long time. The real connection between these two issues is not yet clear.
The structure of this paper is as follows. Section 2 will give short case studies of countries that liberalized their capital account. Section 3 is meant to endow the reader with some basic tools that will be important for the understanding of the concepts that will be presented later on in this paper. This includes definitions and conceptual ideas about measuring capital account liberalization. Section 4 focuses on the theory and empirical findings. In that section, the effects of liberalization on various macroeconomic variables will be presented. Section 5 follows the thoughts of the prior one by having a look at the implications that can be concluded from the theoretical and empirical findings that have been presented in the prior chapter. Section 6 discusses capital account liberalization with respect to the role the IMF played concerning its promotion. This section will also discuss the development of the Fund’s stance towards liberalization. Section 7 will conclude.
Inhaltsverzeichnis (Table of Contents)
- 1. Introduction
- 2. History
- 3. Some Fundamental Tools
- 3.1 Definition
- 3.2 Measuring
- 3.2.1 Capital Account Liberalization
- 3.2.2 Effectiveness of Capital Controls
- 3.3 Timing
- 3.4 Composition of Inward Capital Flows
- 4. Theory & Evidence: Capital Account Liberalization and ...
- 4.1 The post-Keynesian Perspective
- 4.2 Allocative Efficiency
- 4.2.1 Revaluation of Stock Prices
- 4.2.2 The Allocation Puzzle
- 4.2.3 Credits and Banks
- 4.3 Macroeconomic Stability
- 4.4 Growth
- 4.4.1 Long and Short-Term Growth
- 4.4.2 Volatility of Growth
- 4.5 Market Failure
- 4.6 Inflation
- 4.7 The Labor Market
- 4.8 Welfare
- 4.8.1 Government Spending and Financing
- 4.8.2 Elusive Gains from Capital Inflows
- 4.8.3 Welfare Distribution among Different Agents
- 4.8.4 The Role of Productivity
- 4.8.5 Rich and Poor Countries
- 4.8.6 Volatility of Consumption
- 4.9 Spillover Effects
- 4.10 Crises & Exchange Rates
- 5. Implications
- 5.1 When Should Capital Account Liberalization Take Place?
- 5.2 Interventions and Capital Controls
- 6. The IMF & Capital Account Liberalization
- 6.1 History
- 6.1.1 1980-1995
- 6.1.2 An Amendment for the Articles of Agreement
- 6.1.3 The Effects of the Asian Crisis
- 6.2 Consistency
- 6.2.1 Different Policy Issues
- 6.2.1.1 Exchange Rate Policy
- 6.2.1.2 Capital Controls
- 6.2.2 Overview
- 6.2.1 Different Policy Issues
- 6.1 History
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to analyze the complex issue of capital account liberalization, examining both theoretical frameworks and empirical evidence. It explores the historical development of liberalization policies in various countries and investigates the IMF's evolving stance on the topic. The study considers the impact of liberalization on various macroeconomic aspects.
- The theoretical and empirical evidence surrounding capital account liberalization.
- The impact of capital account liberalization on macroeconomic stability and growth.
- The role of the IMF in shaping policies related to capital account liberalization.
- Analysis of different perspectives on the effects of capital account liberalization, including the post-Keynesian view.
- Examination of the relationship between capital account liberalization and financial crises.
Zusammenfassung der Kapitel (Chapter Summaries)
Chapter 1: Introduction introduces the topic of capital account liberalization and highlights its complexities and controversies, emphasizing the inconsistencies between theory and empirical evidence across various economic areas.
Chapter 2: History (presumably) provides a historical overview of capital account liberalization across different countries.
Chapter 3: Some Fundamental Tools defines and details methods for measuring capital account liberalization, including different indices and their limitations. It also discusses the timing and composition of capital inflows.
Chapter 4: Theory & Evidence: Capital Account Liberalization and ... delves into theoretical perspectives (such as the post-Keynesian perspective) and empirical evidence on the effects of capital account liberalization on various macroeconomic factors like allocative efficiency, macroeconomic stability, growth, inflation, the labor market, and welfare.
Chapter 5: Implications explores the implications of the findings, considering when liberalization might be appropriate and the role of interventions and capital controls.
Chapter 6: The IMF & Capital Account Liberalization examines the historical evolution of the IMF's position on capital account liberalization, including its policy changes and the influence of various crises.
Schlüsselwörter (Keywords)
Capital account liberalization, macroeconomic stability, economic growth, financial crises, IMF policies, post-Keynesian economics, capital controls, allocative efficiency, welfare, labor market, empirical evidence.
- Quote paper
- Dipl.-Kfm. Christoph Yew (Author), 2008, Capital Account Liberalization, Munich, GRIN Verlag, https://www.grin.com/document/119837
