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The IMF and the Liberalization of Capital Flows
Author(s) -
Joyce Joseph P.,
Noy Ilan
Publication year - 2008
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2007.00711.x
Subject(s) - capital account , economics , capital flows , openness to experience , international economics , capital (architecture) , liberalization , robustness (evolution) , monetary economics , capital outflow , capital formation , developing country , panel data , macroeconomics , financial capital , market economy , econometrics , economic growth , social psychology , psychology , biochemistry , chemistry , archaeology , gene , history , human capital
We evaluate the claim that the International Monetary Fund precipitated financial crises during the 1990s, by pressuring countries to liberalize their capital accounts prematurely. Using data from a panel of developing economies from 1982–98, we examine whether the changes in the regime governing capital flows took place during participation in IMF programs. We find evidence that IMF program participation is correlated with capital account liberalization episodes during the 1990s. We verify the robustness of our results using alternative indicators of capital account openness. To determine whether decontrol was premature, we compare the economic and financial characteristics of countries that decontrolled during IMF programs with those of countries who did so independently, and find some evidence of IMF‐led premature liberalizations.