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Time-Varying Estimates on the Openness of the Capital Account in Korea and Taiwan

Listed author(s):
  • Helmut Reisen
  • Hélène Yèches

How open are the capital accounts in Korea and Taiwan? Has there been a trend towards more financial openness during the 1980s? This paper aims at answering both questions by estimating a model of interest determination first outlined by Edwards and Khan, in an extension suggested by Haque and Montiel. Use is made of a time-varying parameter estimation based on the Kalman filter technique, instead of the usual constant parameter estimation. The findings indicate a low degree of capital mobility for both Korea and Taiwan, and no trend towards more financial openness (except recently in Taiwan's interbank market). The dismantling of capital controls and of internal financial restrictions is thus likely to impose an important loss of monetary autonomy in both countries ... Quel est le degré d'ouverture des comptes de capital en Corée et à Taiwan ? Une tendance vers une plus grande ouverture financière s'est-elle manifestée au cours des années 80 ? Le but de ce document est de répondre à ces deux questions en procédant à l'estimation d'un modèle de détermination des taux d'intéret, d'abord esquissé par Edwards et Khan, puis approfondi par Haque et Montiel. On utilise l'estimation d'un paramètre variant avec le temps et basée sur la technique du filtre de Kalman au lieu de l'estimation habituelle d'un paramètre constant. Les résultats indiquent un faible degré de mobilité des capitaux, à la fois pour la Corée et Taiwan et aucune tendance vers une plus grande ouverture financière (sauf récemment à Taiwan dans le marché inter-bancaire). Le démantèlement du système de contrôle des capitaux et des restrictions financières internes va donc provoquer une diminution sensible de l'autonomie monétaire dans ces deux pays ...

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Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 42.

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Date of creation: 01 Aug 1991
Handle: RePEc:oec:devaaa:42-en
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