Effects of Capital Flow Liberalization : What is the Evidence from Recent Experiences of Emerging Market Economies?

Author/Editor: Tahsin Saadi Sedik ; Tao Sun
Publication Date: November 16, 2012
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper analyzes the experiences of emerging market economies (EMEs) that have liberalized capital flows over the past 15 years with respect to macroeconomic performance and risks to financial stability. The results of the panel data regressions indicate that greater openness to capital flows is associated with higher growth, gross capital flows, and equity returns and with lower inflation and bank capital adequacy ratios. The effects vary depending on thresholds. As a potential application of these findings, the paper explores the possible effects of liberalization on China by applying the coefficients of explanatory variables to the corresponding variables of China in 2012–16.
Series: Working Paper No. 12/275
Subject(s): Capital flows | China | Emerging markets | Capital account liberalization

Publication Date: November 16, 2012
ISBN/ISSN: 9781589068032/1018-5941 Format: Paper
Stock No: WPIEA2012275 Pages: 27
US$18.00 (Academic Rate:
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