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Liberalization of the Capital Account

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Author Info

  • Donald J. Mathieson
  • Liliana Rojas-Suárez

Abstract

This paper reviews the experience with capital controls in industrial and developing countries, considers the policy issues raised when the effectiveness of capital controls diminishes, examines the medium-term benefits and costs of an open capital account, and analyzes the policy measures that could help sustain capital account convertibility. As the effectiveness of capital controls eroded more rapidly in the 1980s than in earlier periods, new constraints were placed on the formulation of stabilization and structural reform programs. However, experience suggests that certain macroeconomic, financial, and risk management policies would allow countries to attain the benefits of capital account convertibility and reduce the financial risks created by an open capital account.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 92/46.

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Length: 60
Date of creation: 01 Jun 1992
Date of revision:
Handle: RePEc:imf:imfwpa:92/46

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Keywords: Capital account liberalization; Capital controls; Capital flows; exchange rate; capital account convertibility; capital inflows; real exchange rate; foreign exchange; exchange rates; capital inflow; capital mobility; real exchange rate appreciation; exchange rate appreciation; capital account transactions; capital movements; exchange controls; capital transactions; real effective exchange rate; exchange markets; capital outflows; short-term capital; dual exchange rate; foreign exchange reserves; real exchange rates; current account balance; inflation rate; exchange reserves; exchange rate changes; private capital; international capital; exchange rate policy; hedging; exchange rate systems; net capital; exchange restrictions; effective exchange rate; access to international financial markets; exchange arrangements; access to international capital; international capital markets; dual exchange rates; access to international capital markets; exchange transactions; foreign exchange transactions; foreign capital; capital adequacy; exchange rate depreciation; indexation; capital markets; capital accounts; real exchange rate appreciations; exchange rate adjustment; market exchange rate; exchange rate policies; foreign exchange market; exchange rate appreciations; government securities; exchange rate system; exchange rate arrangements; london interbank offer rate; capital control; speculative capital; debt service payments; real domestic interest rates; real appreciation; international capital flows; capital outflow; capital market; exchange agreements; debt service; exchange rate movements; short-term capital inflows; foreign exchange markets; exchange rate volatility; capital account restrictions; capital formation; credit expansion; exchange rate adjustments; official exchange rate; net capital flows; subsidiaries; stabilization policies; private capital inflows; commodity prices; foreign exchange controls; currency substitution; exchange control; floating exchange rate; current account deficit; spot exchange rate; domestic capital; exchange rate regime; capital gain; exchange rate rules; securities markets; private capital inflow; domestic capital formation; cumulative outflows; open market sales; exchange market intervention; exchange rate data; exchange rate expectations; exchange rate fluctuations; daily exchange rate; foreign securities; securities transactions; forward cover; currency convertibility; exchange operations; real exchange rate movement; net capital outflow; excess demand; depreciation of exchange rate; stringent capital controls; options contracts; multiple exchange rate; unstable exchange rates; foreign exchange operations; currency transactions; exchange rate regimes; capital position; exchange systems; moral hazard; exchange rate arrangement; domestic securities; bond issuance; foreign exchange law; flexible exchange rates; exchange rate movement; real exchange rate movements; exchange rate index; exchange rate depreciations; debt-service obligations; unrecorded capital flows; credit rationing; exchange rate floats; financial futures;

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