Liberalizing Capital Movements: Some Analytical Issues

Author: Mr. Gian M Milesi-Ferretti, Ms. Enrica Detragiache, Mr. A. J. Tweedie, Mr. Michael Mussa, Mr. Barry J. Eichengreen, and Mr. Giovanni Dell'Ariccia

Volume/Issue: Volume 2005 Issue 002

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Finance , EI , liberalization , financial market , market liberalization , liberalization of capital outflow , market discipline , market participant , adverse selection , market movement , investment risk , Capital flows , Capital account liberalization , Capital account , Moral hazard , Asia and Pacific , Global

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Summary

This paper addresses the potential gains and risks of open capital markets by first looking at what classical economic theory suggests aboutthe benefits of capital mobility and then examining the counterargumentsarising from problems of incomplete information and other distortions.It shows that the risks of removing controls on flows of capital acrossnational borders are similar to those associated with removing controlson domestic financial institutions. The paper then explores how to manageliberalization to minimize the risks and maximize the benefits.