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Financial openness in developing countries and capital flows determination

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  • Daniela Magalhães Prates

Abstract

This paper discusses two strains of analysis regarding financial openness in developingcountries. Mainstream economists argue that openness brings several advantages tothese countries if liberalizing reforms have been made in the proper sequence, with liberalizationof capital flows as the last reform adopted. The central hypothesis assumed is that theflows are guided by economic fundamentals. An alternative approach, with a post-Keynesiantheoretical basis, emphasizes that in the present context of financial globalization and predominanceof portfolio flows, capital flows are not guided by fundamentals but by shortterm perspectives and by factors that are exogenous to the specific country and, thus, can bereverted at any time, with negative impacts on the developing country. JEL Classification: F65; E12; F43.

Suggested Citation

  • Daniela Magalhães Prates, 1999. "Financial openness in developing countries and capital flows determination," Brazilian Journal of Political Economy, Center of Political Economy, vol. 19(1), pages 58-76.
  • Handle: RePEc:ekm:repojs:v:19:y:1999:i:1:p:58-76:id:1045
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    More about this item

    Keywords

    Liberalization; capital flows; globalization;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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