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Exchange Control and SADC Regional Integration

  • Ellyne, Mark
  • Chater, Rachel
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    This paper addresses the issue of foreign exchange and capital controls in the context of the Southern African Development Community’s goal of regional integration. It reviews the theory and evidence surrounding current and capital account liberalisation and argues that there is a lack of sufficiently refined de jure measures of capital account openness. A new index for measuring exchange control restrictiveness is created based on data from the International Monetary Fund’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER) for the 15 SADC member states. It identifies substantial variation in the exchange control regulations across SADC countries that other existing, more indices fail to account for. The new index illustrates the considerable range of variation of exchange restrictiveness within SADC, as well as illustrating SADC’s relative exchange restrictiveness compared with other countries, inside and outside of Africa. The new index also correlates with several measures of financial development, certain balance of payment items, and some measures of institutional development, which makes it a useful measure for SADC integration. The paper highlights the challenges for SADC monetary union in the sphere of exchange control.

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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46648.

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    Date of creation: 30 Mar 2013
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    Handle: RePEc:pra:mprapa:46648
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    5. Stockman, Alan C & Hernandez D, Alejandro, 1988. "Exchange Controls, Capital Controls, and International Financial Markets," American Economic Review, American Economic Association, vol. 78(3), pages 362-74, June.
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    7. Claudia M. Buch & Jörg Döpke & Christian Pierdzioch, 2002. "Financial Openness and Business Cycle Volatility," Kiel Working Papers 1121, Kiel Institute for the World Economy.
    8. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2004. "Does Financial Liberalization Spur Growth?," Working Paper Research 53, National Bank of Belgium.
    9. Azman-Saini, W.N.W. & Law, Siong Hook & Ahmad, Abd Halim, 2010. "FDI and economic growth: New evidence on the role of financial markets," Economics Letters, Elsevier, vol. 107(2), pages 211-213, May.
    10. Eliana Cardoso & Ilan Goldfajn, 1998. "Capital Flows to Brazil: The Endogeneity of Capital Controls," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 161-202, March.
    11. Anton Korinek, 2011. "The New Economics of Prudential Capital Controls: A Research Agenda," IMF Economic Review, Palgrave Macmillan, vol. 59(3), pages 523-561, August.
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    17. Peter Blair Henry, 2006. "Capital Account Liberalization: Theory, Evidence, and Speculation," NBER Working Papers 12698, National Bureau of Economic Research, Inc.
    18. L.R. de Mello Jr., 1996. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Studies in Economics 9615, School of Economics, University of Kent.
    19. Sebastian Edwards, 2001. "Capital Mobility and Economic Performance: Are Emerging Economies Different?," NBER Working Papers 8076, National Bureau of Economic Research, Inc.
    20. Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002. "FDI and Economic Growth: The Role of Local Financial Markets," Macroeconomics 0212007, EconWPA.
    21. James Tobin, 1978. "A Proposal for International Monetary Reform," Cowles Foundation Discussion Papers 506, Cowles Foundation for Research in Economics, Yale University.
    22. Bartolini, Leonardo & Drazen, Allan, 1997. "Capital-Account Liberalization as a Signal," American Economic Review, American Economic Association, vol. 87(1), pages 138-54, March.
    23. Ding, Ding & Jinjarak, Yothin, 2012. "Development threshold, capital flows, and financial turbulence," The North American Journal of Economics and Finance, Elsevier, vol. 23(3), pages 365-385.
    24. Binici, Mahir & Hutchison, Michael & Schindler, Martin, 2010. "Controlling capital? Legal restrictions and the asset composition of international financial flows," Journal of International Money and Finance, Elsevier, vol. 29(4), pages 666-684, June.
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    26. Jeremy Greenwood & Kent P. Kimbrough, 1987. "An Investigation in the Theory of Foreign Exchange Controls," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 271-88, May.
    27. World Bank, 2011. "World Development Indicators 2011," World Bank Publications, The World Bank, number 2315.
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