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Working Paper - 217 - Capital Account Policies, IMF Programs and Growth in Developing Regions

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This paper examines capital account policy choices in an innovative model with adaptive learning under uncertainty. In the model, countries’ past experiences and IMF programs influence policymakers’ beliefs about impact of capital account liberalization on growth, taking into account constraints imposed by the ‘Mundell’s trilemma’. The model, calibrated to data for Africa, Latin America and developing Asia, is consistent with capital account policies during 1980 – 2010, including the delayed capital account liberalization in Africa. One of the implications of the model is that even countries with liberalized capital accounts could revert to the use of capital controls in the presence of particularly large output shocks.

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  • Zorobabel Bicaba & Zuzana Brixiova & Mthuli Ncube, 2015. "Working Paper - 217 - Capital Account Policies, IMF Programs and Growth in Developing Regions," Working Paper Series 2155, African Development Bank.
    • Handle: RePEc:adb:adbwps:2155
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