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Capital Account Convertibility, Poor Developing Countries, and International Financial Architecture
Author(s) -
Gilbert Christopher L.,
Irwin Gregor,
Vines David
Publication year - 2001
Publication title -
development policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.671
H-Index - 61
eISSN - 1467-7679
pISSN - 0950-6764
DOI - 10.1111/1467-7679.00127
Subject(s) - convertibility , capital account , liberalization , international economics , economics , capital (architecture) , developing country , vulnerability (computing) , negotiation , debt , monetary economics , business , financial system , finance , market economy , economic growth , currency , political science , computer security , archaeology , computer science , law , history
Capital account liberalisation can deliver modest benefits to poor countries. However, the attainment of these benefits depends on prior or simultaneous liberalisation of the banking sector, and on policy and institutional quality. By itself, liberalisation of the capital account will deliver relatively little. It is inconsistent with pegged exchange rates. This all suggests caution. Capital account liberalisation also leaves poor countries more vulnerable to crises. This vulnerability should form part of the agenda of the multilateral agencies. This article argues that debt standstills are the appropriate instrument to deal with this problem; the negotiation of such procedures is an important issue for the IMF in the coming years.