Capital Account Liberalization in Finland: Analysis of Structural Changes

61 Pages Posted: 15 Feb 2006

See all articles by Arto Kovanen

Arto Kovanen

International Monetary Fund (IMF) - African Department

Date Written: December 1995

Abstract

This study analyzes structural changes in the determinants of private sector capital flows that resulted from the reforms both in the domestic financial market and in the external capital account of Finland during the 1980s and early 1990s. A Kouri-Porter type of model of the capital account is used which is applicable for a fixed exchange rate regime. Therefore, attention is paid to the modeling of exchange rate expectations, using the recent target zone literature. In order to capture breaks in the estimated structural parameters during the course of capital account liberalization, a recursive estimation technique is also used. The results show that capital controls were ineffective for policy purposes even before their elimination.

JEL Classification: F21, F31, F32

Suggested Citation

Kovanen, Arto, Capital Account Liberalization in Finland: Analysis of Structural Changes (December 1995). IMF Working Paper No. 95/131, Available at SSRN: https://ssrn.com/abstract=883277

Arto Kovanen (Contact Author)

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

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