In recent decades, capital account liberalization in emerging economies has often been followed by a surge in capital inflows, despite the presence of severe informational asymmetries for foreign lenders. Empirical studies have shown that in emerging economies financial liberalization has led to...

Sebastian Edwards and Alejandra Cox Edwards in their analysis of the Chilean economic liberalization argue that both capital inflows and outflows may have harmed the Chilean economy. They model the Chilean economy as using labor and fixed factors to produce traded and non-traded goods subject to...

This paper introduces a theoretical framework for liquidity management under fixed exchange rate arrangement, derived from the price-specie flow mechanism of David Hume. The framework highlights that the risk of short-term money market rates un-anchoring from the uncovered interest rate parity...

We review the large literature on various economic policies that could help developing economies effectively manage the process of financial globalization. Our central findings indicate that policies promoting financial sector development, institutional quality, and trade openness appear to help...

This paper analyzes issues for developing countries considering a move to capital account convertibility. It reviews the relevant literature, including arguments for sequencing, and analyses in a series of charts various features of the foreign exchange market impact of removing controls, as...

We present a model in which a government's current capital controls policy signals future policies. Controls on capital outflows evolve in response to news on technology, conditional on government attitudes towards taxation of capital. When there is uncertainty over government types, a policy of...