Capital Account Convertibility: A New Model for Developing Countries

July 1, 1994

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 issues for developing countries considering a move to capital account convertibility. It reviews the relevant literature, including arguments for sequencing, and analyses in a series of charts various features of the foreign exchange market impact of removing controls, as against the alternative of foreign exchange intervention. Finally, it examines recent experiences of capital account liberalization by developing countries in the context of multi-pronged stabilization programs.

Subject: Balance of payments, Capital controls, Capital inflows, Exchange rate arrangements, Exchange rates, Exchange restrictions, Foreign exchange

Keywords: Australia and New Zealand, cambio exchange market handling, capital, capital control, Capital controls, capital convertibility, Capital inflows, capital liberalization, Caribbean, control, Eastern Europe, exchange control regulation, exchange rate, Exchange rate arrangements, Exchange rates, Exchange restrictions, foreign exchange market, interest rate, liberalization, Middle East, reaction function, results in abandonment, Southeast Asia, WP

Pages:
26
Volume:
1994
DOI:
https://doi.org/10.5089/9781451955118.001
Issue:
081
Series:
Working Paper No. 1994/081
Stock No:
WPIEA0811994
ISBN:
9781451955118
ISSN:
1018-5941

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Notes

Developing countries comprise Costa Rica, El Salvador, Guyana, Indonesia, Jamaica, Trinidad and Tobago, and Venezuela.

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