Post-Crisis Capital Account Regulation in South Korea and South Africa
AbstractIn the immediate aftermath of the global financial crisis, the world economy was characterized as experiencing a ‘two-speed’ recovery. Industrialized nations, where the crisis occurred, saw slow growth whereas many emerging market and developing countries grew significantly. These growth differentials, coupled with significant interest rate differentials across the globe, triggered significant flows of financial capital to the emerging market and developing countries. As a result, many countries experienced sharp appreciations of their currencies and associated concerns about the development of asset bubbles. This paper examines measures taken to mitigate the harmful effects of excessive capital flows in South Korea and South Africa. Each of these nations experienced similar surges in inflows with associated exchange rate and asset bubble woes, but each took quite different approaches in an attempt to mitigate those effects. South Korea devised a series of capital account regulations on the inflow of capital whereas South Africa liberalized their existing regulations on capital outflows. We econometrically analyze the effectiveness of these measures and find some limited evidence that both countries’ measures were successful in lessening the appreciation and volatility of their exchanges rates. These nations were less successful in stemming asset bubbles.
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Bibliographic InfoPaper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp320.
Date of creation: 2013
Date of revision:
Find related papers by JEL classification:
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-AFR-2013-09-26 (Africa)
- NEP-ALL-2013-09-26 (All new papers)
- NEP-CBA-2013-09-26 (Central Banking)
- NEP-MON-2013-09-26 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joshua Aizenman & Yothin Jinjarak & Donghyun Park, 2011.
"Capital Flows and Economic Growth in the Era of Financial Integration and Crisis, 1990-2010,"
NBER Working Papers
17502, National Bureau of Economic Research, Inc.
- Joshua Aizenman & Yothin Jinjarak & Donghyun Park, 2013. "Capital Flows and Economic Growth in the Era of Financial Integration and Crisis, 1990–2010," Open Economies Review, Springer, vol. 24(3), pages 371-396, July.
- Aizenman, Joshua & Jinjarak, Yothin & Park, Donghyun, 2011. "Capital flows and economic growth in the era of financial integration and crisis, 1990-2010," Santa Cruz Department of Economics, Working Paper Series qt3003w1qd, Department of Economics, UC Santa Cruz.
- Calderon, Cesar & Kubota, Megumi, 2012. "Gross inflows gone wild : gross capital inflows, credit booms and crises," Policy Research Working Paper Series 6270, The World Bank.
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