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Capital account liberalization, free long-term capital flows, financial crises and economic development

Listed author(s):
  • Ajit Singh
Registered author(s):

The first part of this paper examines the theoretical and empirical case for full capital account liberalisation in developing countries(DCs) and finds it unconvincing. Indeed, analysis and evidence presented here point to a compelling case against it. The second part considers the liberalisation of only the long-term capital account, particularly FDI - a form of in-flow favoured by most economists. This paper, however, argues that even FDI, if unregulated, may do more harm than good. It is suggested that DCs should, therefore, resist the new advanced country proposals for a multilateral agreement on FDI.

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File URL: http://www.cbr.cam.ac.uk/fileadmin/user_upload/centre-for-business-research/downloads/working-papers/wp245.pdf
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Paper provided by Centre for Business Research, University of Cambridge in its series Working Papers with number wp245.

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Date of creation: Dec 2002
Handle: RePEc:cbr:cbrwps:wp245
Note: PRO-2
Contact details of provider: Web page: http://www.cbr.cam.ac.uk

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  1. Claessens, Stijn & Dooley, Michael P & Warner, Andrew, 1995. "Portfolio Capital Flows: Hot or Cold?," World Bank Economic Review, World Bank Group, vol. 9(1), pages 153-174, January.
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  3. McKinnon, Ronald I & Pill, Huw, 1999. "Exchange-Rate Regimes for Emerging Markets: Moral Hazard and International Overborrowing," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 19-38, Autumn.
  4. Wyplosz, Charles, 2001. "How Risky is Financial Liberalization in the Developing Countries?," CEPR Discussion Papers 2724, C.E.P.R. Discussion Papers.
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  6. Chari, Anusha & Henry, Peter B., 2002. "Capital Account Liberalization: Allocative Efficiency or Animal Spirits?," Research Papers 1737, Stanford University, Graduate School of Business.
  7. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  8. Glyn, A. & Hughes, A. & Lipietz, A. & Singh, A., 1988. "The Rise And Fall Of The Golden Age," Cambridge Working Papers in Economics 884, Faculty of Economics, University of Cambridge.
  9. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
  10. Williamson, John, 2002. "Proposals for Curbing the Boom-Bust Cycle in the Supply of Capital to Emerging Markets," WIDER Working Paper Series 003, World Institute for Development Economic Research (UNU-WIDER).
  11. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
  12. Demetriades, Panicos O. & Luintel, Kul B., 2001. "Financial restraints in the South Korean miracle," Journal of Development Economics, Elsevier, vol. 64(2), pages 459-479, April.
  13. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  14. Manuel Agosin & Roberto Machado, 2005. "Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 149-162.
  15. Enrique G. Mendoza, 2002. "Credit, Prices, and Crashes: Business Cycles with a Sudden Stop," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 335-392 National Bureau of Economic Research, Inc.
  16. Martin Feldstein, 2002. "Economic and Financial Crises in Emerging Market Economies: Overview of Prevention and Management," NBER Working Papers 8837, National Bureau of Economic Research, Inc.
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