Liberalizing Capital Movements: Some Analytical Issues
March 30, 2005
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This paper addresses the potential gains and risks of open capital markets by first looking at what classical economic theory suggests aboutthe benefits of capital mobility and then examining the counterargumentsarising from problems of incomplete information and other distortions.It shows that the risks of removing controls on flows of capital acrossnational borders are similar to those associated with removing controlson domestic financial institutions. The paper then explores how to manageliberalization to minimize the risks and maximize the benefits.
Subject: Balance of payments, Capital account, Capital account liberalization, Capital flows, Financial crises, Financial sector policy and analysis, Moral hazard
Keywords: adverse selection, Asia and Pacific, Capital account, Capital account liberalization, Capital flows, EI, financial market, Global, investment risk, liberalization, liberalization of capital outflow, market discipline, market liberalization, market movement, market participant, Moral hazard
Pages:
19
Volume:
2005
DOI:
Issue:
002
Series:
Economic Issues No. 2005/002
Stock No:
EIIEA017
ISBN:
9781557757920
ISSN:
1020-5098
