Effects of Capital Flow Liberalization: What is the Evidence from Recent Experiences of Emerging Market Economies?

November 16, 2012

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Format: Chicago

Tahsin Saadi Sedik, and Tao Sun. Effects of Capital Flow Liberalization: What is the Evidence from Recent Experiences of Emerging Market Economies?, (USA: International Monetary Fund, 2012) accessed November 21, 2024

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 the experiences of emerging market economies (EMEs) that have liberalized capital flows over the past 15 years with respect to macroeconomic performance and risks to financial stability. The results of the panel data regressions indicate that greater openness to capital flows is associated with higher growth, gross capital flows, and equity returns and with lower inflation and bank capital adequacy ratios. The effects vary depending on thresholds. As a potential application of these findings, the paper explores the possible effects of liberalization on China by applying the coefficients of explanatory variables to the corresponding variables of China in 2012–16.

Subject: Balance of payments, Capital account liberalization, Capital adequacy requirements, Capital flows, Financial regulation and supervision, Financial sector policy and analysis, Financial sector risk, Financial services, Real interest rates

Keywords: Capital account liberalization, Capital adequacy requirements, Capital flow liberalization, Capital flows, China, Dynamic panel data specification, Emerging market economies, Equity liberalization index, Financial sector risk, Flow liberalization, Further liberalization, Global, Interest rate liberalization, Liberalization, Liberalization in China, Liberalization of capital flow, Real interest rates, Restrictiveness index, Simulations, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/275
Stock No:

WPIEA2012275
ISBN:

9781589068032
ISSN:

1018-5941

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