Abstract
The paper investigates theoretical background if countries with unregulated capital flows are more vulnerable to currency crises. In order to solve this question properly the paper considers sequence, precondition of the Capital Account Liberalization process and different generation of currency crisis models. Furthermore, theoretical studies pointed that the speed and sequence of the CAL process needs to be adequate for the country financial development and financial liberalization.
Highlights
The topic of capital account liberalization ( CAL) and currency crisis episodes is an important issue for today’s emerging market economies in the current era of multinational financial integration, the technology progress and development of international organizations such as the IMF, EU and OECD
The CAL process is not a new issue; a similar situation occurred in the era of globalization from 1870-1914 when the capital flows were free of any restrictions.[1]
The debate about the relationship between CAL and the currency crisis phenomena has become a heated one. This is due to the fact that in the last two decades, the increase of the intensity of the CAL process has been accompanied by an increase of currency and banking crises phenomenon, in developing countries
Summary
The topic of capital account liberalization ( CAL) and currency crisis episodes is an important issue for today’s emerging market economies in the current era of multinational financial integration, the technology progress and development of international organizations such as the IMF, EU and OECD. The debate about the relationship between CAL and the currency crisis phenomena has become a heated one. This is due to the fact that in the last two decades, the increase of the intensity of the CAL process has been accompanied by an increase of currency and banking crises phenomenon, in developing countries. I will summary my theoretical observations about the relationship between CAL and the Currency Crisis will be presented in third section of this chapter
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