Sequencing Capital Account Liberalization: Lessons From the Experiences in Chile, Indonesia, Korea, and Thailand
IMF Working Papers, November 1, 1997
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- Sequencing Capital Account Liberalization: Lessons From the Experiences in Chile, Indonesia, Korea, and Thailand
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Bibliographic details
- Authors: Claudia Echeverria, Salim M. Darbar, R. B. Johnston
- Published: November 1, 1997
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451857450.001
Scope and purpose
- Examines issues in sequencing and pacing capital account liberalization.
- Draws lessons from experience in four countries: Chile, Indonesia, Korea, and Thailand.
- Focuses on the interrelationship between:
- capital account liberalization,
- domestic financial sector reforms,
- the design of monetary and exchange rate policy.
Core findings
- Capital account liberalization should be approached as an integrated part of comprehensive reform strategies.
- Liberalization needs to be paced with the implementation of appropriate macroeconomic and exchange rate policies.
- Sequencing and pacing are critical to manage risks associated with capital flows and to ensure domestic financial stability.
Country evidence (case focus)
- Case studies: Chile, Indonesia, Korea, and Thailand.
- Lessons are drawn from comparative experience across these four countries, emphasizing how sequencing and domestic reforms affected outcomes.
Policy implications and recommendations
- Integrate capital account liberalization into broader reform packages rather than treating it as a standalone policy.
- Coordinate capital account liberalization with:
- domestic financial sector reforms,
- monetary policy frameworks,
- exchange rate policy design (including exchange market arrangements and exchange rate bands).
- Pace liberalization to align with the readiness of domestic financial markets and institutional capacity.
Keywords and subject coverage
- Subject: Balance of payments, Capital account, Capital account liberalization, Capital flows, Capital inflows, Exchange rates, Foreign exchange.
- Keywords include: Capital account, Capital account liberalization, capital flows, Capital inflows, currency convertibility, exchange market arrangement, exchange market development, exchange rate, exchange rate band, exchange rate movement, Exchange rates, Financial sector reform, interest rate, interest rate liberalization, liberalization, liberalization measure, liberalization of the exchange system, pace capital account liberalization, WP.