A Welfare Analysis of Capital Account Liberalization PDF Download

Author: Jürgen von Hagen
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
We develop a model of a small open economy with credit market frictions to analyze the consequences of capital account liberalization. We show that financial opening facilitates the inflows of cheap foreign funds and improves production efficiency. However, capital account liberalization has important distributional consequences. Specifically, it may be impossible to use public transfers to fully compensate the loss of those who are negatively affected by capital account liberalization. This explains why financial opening often meets fierce opposition even though it leads to efficiency gains for the economy as a whole. From a practical perspective, capital controls should be lifted gradually for a smooth transition.

Author: Davide Furceri
Publisher: International Monetary Fund
ISBN: 1513531409
Category : Business & Economics
Languages : en
Pages : 26

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Book Description
This paper examines the distributional impact of capital account liberalization. Using panel data for 149 countries from 1970 to 2010, we find that, on average, capital account liberalization reforms increase inequality and reduce the labor share of income in the short and medium term. We also find that the level of financial development and the occurrence of crises play a key role in shaping the response of inequality to capital account liberalization reforms.

Author: Peter Blair Henry
Publisher:
ISBN: 9780979037634
Category : Capital
Languages : en
Pages : 82

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Book Description
"Writings on the macroeconomic impact of capital account liberalization find few, if any, robust effects of liberalization on real variables. In contrast to the prevailing wisdom, I argue that the textbook theory of liberalization holds up quite well to a critical reading of this literature. The lion's share of papers that find no effect of liberalization on real variables tell us nothing about the empirical validity of the theory, because they do not really test it. This paper explains why it is that most studies do not really address the theory they set out to test. It also discusses what is necessary to test the theory and examines papers that have done so. Studies that actually test the theory show that liberalization has significant effects on the cost of capital, investment, and economic growth"--National Bureau of Economic Research web site.

Author: Ester Faia
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
In recent decades, capital account liberalization in emerging economies has often been followed by a surge in capital inflows, despite the presence of severe informational asymmetries for foreign lenders. Empirical studies have shown that in emerging economies financial liberalization has led to an increase in consumption volatility (also relative to output). I use a small open economy model where foreign lending to households is constrained by an endogenous borrowing limit. Borrowing is secured by collateral in the form of durable investment whose accumulation is subject to adjustment costs. This economy is able to replicate the aforementioned stylized fact in response to various shocks (productivity, foreign demand and government expenditure). I find that financial liberalization reduces welfare since it increases the volatility of consumption and employment.

Author: Sebastian Edwards
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 46

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Book Description
This paper deals with the dynamics of trade and capital account liberalization in a developing country. The welfare consequences of trade and capital account liberalization under alternative sequencing scenarios are investigated. We draw on standard trade theory results to show that the opening of the capital account in the presence of trade distortions may be welfare reducing if foreign borrowing is used to increase investment. However we demonstrate that this welfare reducing effect of opening the capital account will not occur if shadow prices are used to guide investment decisions. It is then shown that if capital market restrictions fall disproportionally on investment (as opposed to consumption) a gradual reduction of import tariffs is superior to an abrupt trade liberalization.

Author: Barry Eichengreen
Publisher:
ISBN:
Category : Electronic book
Languages : en
Pages :

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Author: Olivier Jeanne
Publisher: Peterson Institute
ISBN: 0881326488
Category : Business & Economics
Languages : en
Pages : 147

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Book Description
Most countries emerged from the Second World War with capital accounts that were closed to the rest of the world. Since then, a process of capital account opening has occurred, with the result that all developed and many emerging-market countries now have capital accounts that are both de facto and de jure open, while many developing countries also have de facto openness. This study examines this in part by considering some of the first lessons from the current global financial crisis. This crisis may change the terms of the debate on capital account liberalization in a deeper and more lasting way than any of the crises of the past two decades because it may mark a reversal in the secular trend of financial liberalization at the core of the international financial system. The current crisis also raises new questions about the appropriate policy responses to boom-bust dynamics in domestic credit and in international credit flows. Intellectual consistency is needed between the domestic and international dimensions of financial regulation and the policies aimed at dealing with boom-bust dynamics in domestic and international credit.

Author: Dennis Bonam
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Mr.Giovanni Dell'Ariccia
Publisher: International Monetary Fund
ISBN: 9781557757777
Category : Business & Economics
Languages : en
Pages : 74

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Book Description
Capital account liberalization - orderly, properly sequence, and befitting the individual circumstances of countries- is an inevitable step for all countries wishing to realize the benefits of the globalized economy. This paper reviews the theories behind capital account liberalization and examines the dangers associated with free capital flows. The authors conclude that the dangers can be limited through a combination of sound macroeconomic and prudential policies.

Author: Mr.Udaibir S. Das
Publisher: International Monetary Fund
ISBN: 1589069277
Category : Business & Economics
Languages : en
Pages : 330

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Book Description
The book covers a wide range of topics of relevance to policymakers in countries that have sovereign wealth funds (SWFs) and those that receive SWF investments. Renowned experts in the field have contributed chapters. The book is organized around four themes: (1) the role and macrofinancial linkages of SWFs, (2) institutional factors, (3) investment approaches and financial markets, and (4) the postcrisis outlook. The book also discusses the challenges facing sovereign wealth funds in the coming years, from an inside perspective on countries, including Canada, Chile, China, Norway, Russia, and New Zealand. Economics of Sovereign Wealth Funds will contribute to a further understanding of the nature, strategies and behavior of SWFs and the environment in which they operate, as their importance is likely to grow in the coming years.