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Capital Account Convertibility and the Financial Sector

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As if it were still necessary, events unfolding in Asia for over a year reconfirm the critical importance of a sound, efficient financial sector for economic development and growth. Indeed, a growing number of studies underscore the risks that a vulnerable financial sector pose for macroeconomic stability. In this context, it is often argued that the liberalization of capital account heightens financial sector vulnerability. But openness to capital flows can also underpin and deepen the development of the financial sector, thus contributing to its robustness. The paper examines these issues, drawing a parallel between capital account liberalization and domestic financial deregulation, indicating the role of the macroeconomic policy environment and reviewing their implications for the pace and sequence of the external liberalization process. The examination concludes with a brief discussion of the role and procedures the IMF envisages to take toward capital account liberalization.

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  • Manuel Guitián, 1998. "Capital Account Convertibility and the Financial Sector," Journal of Applied Economics, Universidad del CEMA, vol. 1, pages 209-229, November.
  • Handle: RePEc:cem:jaecon:v:1:y:1998:n:1:p:209-229
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    File URL: http://www.cema.edu.ar/publicaciones/download/volume1/guitian.pdf
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    Cited by:

    1. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    2. J. Ramos-Tallada., 2013. "The IMF and management of capital flows: the long road towards a pragmatic approach," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 31, pages 63-85, Autumn.
    3. Yan, Ho-don, 2007. "Does capital mobility finance or cause a current account imbalance?," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(1), pages 1-25, March.

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