The IMF and the Liberalization of Capital Flows

18 Pages Posted: 14 Jul 2008

See all articles by Joseph P. Joyce

Joseph P. Joyce

Wellesley College - Department of Economics

Ilan Noy

Victoria University of Wellington

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Abstract

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.

Suggested Citation

Joyce, Joseph P. and Noy, Ilan, The IMF and the Liberalization of Capital Flows. Review of International Economics, Vol. 16, Issue 3, pp. 413-430, August 2008, Available at SSRN: https://ssrn.com/abstract=1158792 or http://dx.doi.org/10.1111/j.1467-9396.2007.00711.x

Joseph P. Joyce (Contact Author)

Wellesley College - Department of Economics ( email )

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Wellesley, MA 02181
United States
781-283-2160 (Phone)
781-283-2177 (Fax)

Ilan Noy

Victoria University of Wellington ( email )

P.O. Box 600
Wellington, 6140
New Zealand

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