• Advanced developing countries are increasingly encouraged to remove existing capital controls, but mixed experiences with capital account opening caution that reform must be carefully designed to increase efficiency and growth without compromising stability • A gradual dismantling of...

In the last decade, many of the more advanced developing countries in Latin America and Asia have deregulated and opened up their financial markets. What impact has this had on the efficiency of the financial sector? How can the existence of sustained interest differentials be explained?