An Analysis of the Process of Capital Liberalization in Italy

April 1, 1992

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

Beginning in 1985 Italy embarked on a path of progressive removal of its system of controls on portfolio investment, a process formally completed with the abolition of all remaining restrictions in 1990. In this paper we review this policy of capital liberalization and integrate the analysis with an examination of the process of stabilization of the lira exchange rate in the 1980s. Various indicators of capital controls’ effectiveness and target zone credibility are used to identify the temporal relations among capital liberalization, exchange rate stabilization and capital flows.

Subject: Balance of payments, Capital controls, Capital flows, Capital inflows, Exchange rate stability, Exchange rates, Foreign exchange

Keywords: capital control premium, Capital controls, Capital flows, Capital inflows, capital liberalization, capital mobility, exchange rate, exchange rate expectation, Exchange rate stability, Exchange rates, forward market, interest rate differential, liberalization of capital movement, net capital, WP

Pages:
38
Volume:
1992
DOI:
https://doi.org/10.5089/9781451844436.001
Issue:
027
Series:
Working Paper No. 1992/027
Stock No:
WPIEA0271992
ISBN:
9781451844436
ISSN:
1018-5941

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