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This paper reviews and discusses issues involved in assessing the relationship between capital account liberalization and economic performance. First, it discusses the different measures of restrictions used in the literature. Second, it reviews the literature on the relationship between growth and capital account liberalization. Finally, it identifies and explains some of the differences in the results of the various studies and provides some support for a positive effect of capital account liberalization on growth, especially for developing countries.

Exports and Imports --- Finance: General --- Current Account Adjustment --- Short-term Capital Movements --- International Investment --- Long-term Capital Movements --- General Financial Markets: General (includes Measurement and Data) --- International economics --- Finance --- Capital account liberalization --- Capital account --- Capital flows --- Capital controls --- Stock markets --- Balance of payments --- Capital movements --- Stock exchanges --- Malaysia

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This paper compares the importance of precautionary and mercantilist motives in the hoarding of international reserves by developing countries. Overall, empirical results support precautionary motives; in particular, a more liberal capital account regime increases international reserves. Theoretically, large precautionary demand for international reserves arises as a self-insurance to avoid costly liquidation of long-term projects when the economy is susceptible to sudden stops. The welfare gain from the optimal management of international reserves is of a first-order magnitude, reducing the welfare cost of liquidity shocks from a first-order to a second-order magnitude.

Developing countries -- Economic policy. --- Electronic books. -- local. --- Fiscal policy -- Developing countries -- Econometric models. --- Banks and Banking --- Exports and Imports --- Finance: General --- Monetary Policy --- Portfolio Choice --- Investment Decisions --- Trade: General --- Current Account Adjustment --- Short-term Capital Movements --- Banking --- Finance --- International economics --- International reserves --- Liquidity --- Reserves accumulation --- Export performance --- Capital account liberalization --- Foreign exchange reserves --- Economics --- Exports --- Balance of payments --- China, People's Republic of

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In this paper, we develop a proposal for a controlled approach to capital account liberalization for economies experiencing large capital inflows. The proposal essentially involves securitizing a portion of capital inflows through closed-end mutual funds that issue shares in domestic currency, use the proceeds to purchase foreign exchange from the central bank and then invest the proceeds abroad. This would eliminate the fiscal costs of sterilizing those inflows, give domestic investors opportunities for international portfolio diversification and stimulate the development of domestic financial markets. More importantly, it would allow central banks to control both the timing and quantity of capital outflows. This proposal could be part of a broader toolkit of measures to liberalize the capital account cautiously when external circumstances are favorable. It is not a substitute for other necessary policies such as strengthening of the domestic financial sector or, in some cases, greater exchange rate flexibility. But it could in fact help create a supportive environment for these essential reforms.

Exports and Imports --- Foreign Exchange --- Money and Monetary Policy --- Current Account Adjustment --- Short-term Capital Movements --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- International economics --- Monetary economics --- Currency --- Foreign exchange --- Capital account liberalization --- Capital account --- Currencies --- Exchange rates --- Capital account convertibility --- Balance of payments --- Money --- United States

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This paper offers a coherent empirical analysis of the determinants of the real exchange rate, the current account, and the net foreign assets position in low income countries. The paper focuses on indicators specific to low income countries, such as the quality of policies and institutions, the special access to official external financing, and the role of shocks. In addition to more standard factors, we find that domestic financial liberalization is associated with higher current account balances and net foreign asset positions, while capital account liberalization is associated with lower current account balances and net foreign asset positions and with more appreciated real exchange rates. Negative exogenous shocks tend to raise (reduce) the current account in countries with closed (opened) capital accounts. Finally, foreign aid is progressively absorbed over time through net imports, and is associated with a more depreciated real exchange rate in the long-run.

Business & Economics --- Economic Theory --- Macronomics --- Foreign exchange rates --- Finance, Public --- Econometric models. --- Developing countries --- Economic policy. --- Exports and Imports --- Foreign Exchange --- Macroeconomics --- Current Account Adjustment --- Short-term Capital Movements --- Personal Income, Wealth, and Their Distributions --- International Investment --- Long-term Capital Movements --- International economics --- Currency --- Foreign exchange --- Current account --- Real exchange rates --- Personal income --- Capital account liberalization --- Foreign assets --- Balance of payments --- Income --- Investments, Foreign --- United States

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This paper discusses the experience of the EU's eight new member countries (EU8) between 1995 and 2003 when the bulk of capital account liberalization took place, focusing on interest-rate-sensitive portfolio flows and financial flows. It takes stock of the lessons from capital flow patterns to draw policy conclusions. There were two distinct groups in terms of the speed of capital account liberalization: rapid liberalizers and cautious liberalizers. The speed of disinflation and the level of public debt were major determinants of the size of interest-rate-sensitive portfolio inflows. Monetary and exchange rate policies were the main instruments used to react to large interest-sensitive inflows, whereas fiscal tightening was seldom used as a direct reaction to inflows.

Capital movements -- European Union countries. --- Electronic books. -- local. --- Fiscal policy -- European Union countries. --- Foreign exchange administration -- European Union countries. --- Monetary policy -- European Union countries. --- Exports and Imports --- Foreign Exchange --- Financial Markets and the Macroeconomy --- International Investment --- Long-term Capital Movements --- Current Account Adjustment --- Short-term Capital Movements --- Financial Aspects of Economic Integration --- International economics --- Currency --- Foreign exchange --- Capital account liberalization --- Capital flows --- Capital account --- Capital inflows --- Balance of payments --- Capital movements --- Hungary