scholarly journals Macroeconomic aspects of financial liberalization

2006 ◽  
Vol 53 (4) ◽  
pp. 439-456 ◽  
Author(s):  
Rajmund Mirdala
Keyword(s):  
Emerging Economies ◽  
Capital Flows ◽  
Financial Integration ◽  
Financial Liberalization ◽  
Equity Market ◽  
Capital Account ◽  
Literature Report ◽  
Firm Level ◽  
Capital Account Liberalization ◽  
International Financial Integration

The positive and the negative macroeconomic aspects of the financial liberalization for the developing and emerging economies are well described in the present literature. But it is not easy to clearly summarize the final effects of the financial integration on the certain country. For instance the argument about the growth benefits of the capital account liberalization is likely to be inadequate considering the financial crises in the emerging markets at the end of the last century. On the other hand, many authors (especially in the financial literature) report that the equity market liberalizations help to significantly boost the economic growth. There are also some examples on the microeconomic level (firm level or industry level) when the international financial integration brings certain benefits to the integrated enterprises and the capital flows restriction leads to the distortionary effects. In the paper we analyze the macroeconomic effects of the capital flows liberalization.

scholarly journals A comparative analysis of the financial liberalization in Turkey and Brazil

2020 ◽  
Vol 67 (2) ◽  
pp. 207-224
Author(s):  
Gover Tugrul
Keyword(s):  
Comparative Analysis ◽  
Capital Flows ◽  
Financial Integration ◽  
Financial Liberalization ◽  
Capital Controls ◽  
The Other ◽  
Capital Account ◽  
Other Hand ◽  
Capital Outflows ◽  
The One

The objective of this study is to explain the financial liberalization processes in Turkey and Brazil, to analyze the external financial liberalization processes and the financial integration indices and to compare the developments in the financial integration indices of Turkey and Brazil during the period 1980-2013. Our analysis revealed that, on the one hand, Brazil has continued its external liberalization process since the 1990s, but on the other hand, Brazil used two main tools to manage the capital flows, namely, capital controls and liberalization of capital outflows. In contrast, Turkey did not employ these tools following liberalization of the capital account.

Can Capital Account Liberalization Lessen Capital Volatility in a Country with “Original Sin”?

2012 ◽  
Vol 11 (2) ◽  
pp. 1-22 ◽  
Author(s):  
Bokyeong Park ◽  
Jiyoun An
Keyword(s):  
Emerging Economies ◽  
Capital Flows ◽  
Institutional Quality ◽  
Capital Flow ◽  
Original Sin ◽  
Capital Account ◽  
Capital Account Liberalization ◽  
Foreign Loans ◽  
The Difference ◽  
International Status

The term “original sin” refers to countries that cannot take out foreign loans that are denominated in its own currency. This study investigates how capital account liberalization affects capital flow volatility in countries with and without original sin. Overall, we find that the level of capital openness increases capital flow volatility, and that countries with original sin experience additional volatility in their capital flows. When the data sample is limited to countries with high institutional quality, the difference remains between the two groups—confirming that the different effects of capital openness on volatility should be attributed to differences in the international status of currencies rather than in institutional quality. Emerging economies whose currencies are not internationalized should therefore be more cautious of capital account liberalization.

Capital Account Liberalization and Firm Innovation: Worldwide Evidence

2021 ◽  
pp. 0148558X2110594
Author(s):  
Fangfang Hou ◽  
Xinpeng Xu
Keyword(s):  
Positive Impact ◽  
Set Covering ◽  
Capital Account ◽  
Legal Environment ◽  
Firm Level ◽  
Firm Innovation ◽  
Capital Account Liberalization ◽  
Data Set ◽  
Innovation Output

This study investigates whether capital account liberalization, a leading characteristic of globalization, is associated with firms’ future innovation output. Employing a novel firm-level panel data set covering 41 countries over two decades, we show that capital account liberalization is significantly associated with higher corporate patenting activities, particularly for firms from innovation-intensive industries. Further analyses show that the effect is stronger among firms from economies in a better legal environment, signifying the important role of good institutional quality in facilitating the positive impact of liberalization. The effect is also stronger among firms with higher initial productivity, consistent with the “productivity” hypothesis, according to which bigger and more productive firms generate more innovation after liberalization. Our findings are robust to the use of various measurements, subsamples, and estimation models. This study provides global firm-level evidence of the real economic impact of financial globalization.

scholarly journals The Chair’s Summing Up Independent Evaluation Office - IMF advice on Capital Flows Executive Board Meeting 20/93 September 18, 2020

Policy Papers ◽  
2020 ◽  
Vol 20 (41) ◽  
Author(s):  
Keyword(s):  
Capital Flows ◽  
Technical Assistance ◽  
Developing Economies ◽  
Capital Flow ◽  
Policy Framework ◽  
Capital Account ◽  
Major Advance ◽  
Capital Account Liberalization ◽  
Management Measures ◽  
Independent Evaluation

Executive Directors welcomed the report of the Independent Evaluation Office (IEO) on IMF Advice on Capital Flows. Directors appreciated the high quality of the report, and its thematic and background country studies. Directors welcomed the finding that the adoption of the Institutional View (IV), along with the development of other frameworks and additional tools, had represented a major advance in the Fund’s policy framework to provide systematic advice to member countries on the management of capital flows and capital account liberalization. Directors also noted the conclusion that, in its application, the Fund had generally followed the IV and other policy frameworks to ensure that the advice was consistent, tailored to country circumstances, and evenhanded across countries. Directors welcomed that capital flow management measures (CFMs) have generally not been used to substitute for warranted policy adjustments. Directors also welcomed the finding that most authorities broadly support the IV’s sequenced framework to capital account liberalization and appreciated the Fund’s specific advice in many cases, especially in the context of technical assistance. More recently, faced with the abrupt capital flow reversals during the COVID-19 crisis, Directors noted that emerging markets and developing economies generally followed a multi-pronged approach broadly consistent with the IV framework and made relatively little use of CFMs.

scholarly journals Financial integration and macroeconomic volatility in Zimbabwe

2020 ◽  
Vol 22 (2) ◽  
pp. 229-248
Author(s):  
Richard Makoto
Keyword(s):  
Capital Flows ◽  
Financial Integration ◽  
Negative Impact ◽  
Content Type ◽  
Financial Repression ◽  
Macroeconomic Volatility ◽  
International Financial Integration ◽  
Negative Effect ◽  
Short Time ◽  
The Impact

PurposeMany developing countries are pursuing policies that foster international financial integration after decades of financial repression. Greater access to foreign financial markets may have both positive and negative impact on the performance of the economy. One of the concerns of international financial integration is macroeconomic volatility which may affect both monetary and real sectors. Zimbabwe has chosen to pursue a financial liberalization strategy in the form of imperfect financial integration following periods of excessive domestic shocks. An upsurge of capital flows since the epic of economic crisis in the 2000s has been observed with varying macroeconomic impacts. This study empirically examines the impact of partial international financial integration on the volatility of macroeconomic variables.Design/methodology/approachThe study utilized an ARDL Model suggested by Pesaran et al., (2003) which is appropriate for short time periods.FindingsThe results show that financial integration has a negative effect on output volatility while insignificant on consumption volatility.Practical implicationsThe study recommends that the country should gradually liberalize the capital account and properly sequence financial development reforms in order to minimize losses from global financial integration.Originality/valueThe study used time series for Zimbabwe during a period of external imbalance, repeated economic cycles, sudden stops in capital flows and limited scope of imperfect financial integration. Findings in such an economy will be a referral for policymakers in other economies that would want to pursue international financial integration.

Financial Openness, Capital Flows and Risk Sharing in Africa

2015 ◽  
Vol 15 (1) ◽  
pp. 51-82
Author(s):  
John Bosco Nnyanzi
Keyword(s):  
Capital Markets ◽  
Capital Flows ◽  
Risk Sharing ◽  
Development Cooperation ◽  
Sub Saharan Africa ◽  
Empirical Literature ◽  
Capital Account ◽  
Capital Account Liberalization ◽  
Consumption Risk ◽  
Liberalization Policy

Empirical literature suggests that while there is low but improving risk sharing in developed countries, risk sharing in the developing countries is low and has remained low. We confirm this observation using panel data for the period 1986–2011. Overall we find weak evidence that an increase in capital account liberalization reduces the dependence of idiosyncratic consumption on idiosyncratic gross domestic product (GDP) in sub-Saharan Africa (SSA). An interaction of capital account liberalization proxy with capital flows produces a mixed effect on consumption risk sharing, calling for caution in capital account liberalization policy design. On the other hand, while we find no evidence that financial integration, as measured by cross-border capital flows in terms of the ratio of foreign assets to GDP, is helpful in consumption risk sharing in SSA, equity appears to hold the potential of precipitating a reduction in consumption risk while foreign direct investment (FDI) and debt are particularly noticeable to have a facilitative role in unhinging idiosyncratic consumption from idiosyncratic output in East African Community (EAC) and Southern African Development Cooperation (SADC) regional groupings, respectively. FDI liabilities in particular elicit a significantly positive enhancement of risk sharing in EAC and are economically meaningful in SADC. The impact of individual assets and liabilities is overall mixed, both in SSA and regional groupings, pointing to an underdeveloped capital markets scenario in need of urgent attention in terms of well-planned policies and strategies directed towards developing competitive capital markets in Africa for purposes of risk sharing.

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