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An Analysis of the Process of Capital Liberalization in Italy


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  • Gordon M. Bodnar
  • Leonardo Bartolini


Beginning in 1985 Italy embarked on a path of progressive removal of its system of controls on portfolio investment, a process formally completed with the abolition of all remaining restrictions in 1990. In this paper we review this policy of capital liberalization and integrate the analysis with an examination of the process of stabilization of the lira exchange rate in the 1980s. Various indicators of capital controls’ effectiveness and target zone credibility are used to identify the temporal relations among capital liberalization, exchange rate stabilization and capital flows.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 92/27.

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Length: 38
Date of creation: 01 Apr 1992
Date of revision:
Handle: RePEc:imf:imfwpa:92/27

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Postal: International Monetary Fund, Washington, DC USA
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Keywords: Capital controls; Capital flows; exchange rate; capital inflows; capital mobility; capital movements; exchange rates; capital market; foreign exchange; capital outflows; net capital; forward exchange; exchange rate expectations; dual exchange rates; capital control; exchange rate band; capital inflow; forward exchange rate; exchange rate policy; liberalization of capital; exchange rate instability; capital markets; exchange control; forward exchange rates; forward markets; stabilization of exchange rate; current account deficit; foreign exchange control; exchange rate commitment; exchange rate mechanism; net capital flows; foreign securities; exchange markets; current exchange rate; dual exchange rate; international capital flows; capital flow; exchange rate devaluation; domestic capital; exchange restrictions; exchange controls; exchange policy; currency values; international capital; exchange rate arrangement; capital transactions; forward exchange contracts; exchange transactions; exchange rate premium; speculative capital; domestic borrowing; capital account transactions; exchange rate systems; current account deficits; foreign exchange restrictions; exchange rate determination; capital accounts; real exchange rate; alternative exchange rate; exchange rate developments; stock shares; domestic capital market; measures of volatility; forward cover; foreign exchange policy; exchange rate flexibility;


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Cited by:
  1. Elias Belessakos & Michael Papaioannou, 1996. "Simple credibility tests of the ERM bands for the pound sterling and the Italian lira," Open Economies Review, Springer, vol. 7(3), pages 219-236, July.
  2. Bartolini, Leonardo & Drazen, Allan, 1997. "Capital-Account Liberalization as a Signal," American Economic Review, American Economic Association, vol. 87(1), pages 138-54, March.


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