Liberalization Of Capital Flows Research Articles

From the fossil fuel era to the age of light

This article traces global economic trends and sources of energy from the fossil fuel era of the Industrial Age to the Information and Solar Age. Keynesian economics as well as political, economic and military power, led to the industrialized countries’ petroleum addiction and the demonization of OPEC. The shift from the Old Economy to the New Economy will be accompanied by greater emphasis on energy efficiency and a shift towards renewable resources, “green” energy technologies and environmental protection and restoration. The globalization of economics, finance, markets and trade driven by technology and liberalization of capital flows have led to the dematerialization of OECD economies. This will necessitate recognition of, and investment in, people and social infrastructure with education and health care as key economic sectors and knowledge, intellectual, social and ecological capital as the key factors of production. Due to advances in the internet and e‐commerce and the increasing interchangeability of money with information there will be a continuing flight into pure information‐based electronic trading systems and the growth of a less costly and more efficient pure high‐tech barter system. The issues of unequal terms of trade, poverty and the need for development will continue. If OPEC is able to grasp the significance of the shift to the Solar Age, it has an opportunity to reassert its leadership role in development.

Is a Plumber or a New Financial Architect Needed to End Global International Liquidity Problems?

The paper starts with a critical review of two alternative theories of capital markets: neoclassical efficient-market theories and Keynesian liquidity preference theories, which differ radically in their views concerning the functions and operation of capital markets. Contrasting the experience of the global economy in the pre- and post-Bretton Woods eras, the author finds that the facts do not support the efficient-markets hypothesis. Indeed, instead of fulfilling the utopian promises of greater stability, more rapid growth and full employment predicted by efficient-markets theorists, liberalization of capital flows in the post-Bretton Woods era has been associated with exchange rate instability, financial crises, slower global economic growth and greater unemployment. The theoretical implication of the contrast between theoretical expectations and performance is that a Keynesian reformulation of the micro-foundations of economic analysis is required. The policy implications are that a return to a fixed-exchange rate regime, coupled with restraints on the international movement of capital and supported by a clearing-union, are essential. The paper concludes with a proposal for a comprehensive, interconnected package of reforms.

Capital outflow liberalization and stock market reaction in an emerging market: Experience from Greece

This paper examines the response of the Greek equities market to the liberalization of capital flows during the 1992–1994 period. While past empirical research has largely examined the effects of capital inflow liberalization in emerging markets, we focus on capital outflow liberalization. In particular, we consider changes in the regulatory environment that allow domestic investors to hold foreign risky assets. Employing a time series of daily equity returns, a wealth effect is found that is indirectly linked to the announcement of capital flow liberalization. Additionally, our results reveal a significant change in the daily return distribution before and after final implementation.

Uneven development and the liberalisation of trade and capital flows: the case of Mexico

A dual economy model is used to analyse the preconditions for successful industrialisation under different trading and investment regimes. Assuming increasing returns to scale in industry and decreasing returns in agriculture, it is shown that protectionism may aid economic development at some points in a country's development process but retard it at others, that the desirable degree of openness depends on the stage of development already attained, and that improvements in agricultural productivity may reduce the overall rate of growth under a free-trade regime. Applying the model to Mexico, it is argued that liberalisation is likely to bring long-run industrialisation in the Mexican case but that this strategy implies substantial costs to a large segment of the population in the short and medium term.

Unemployment in Industrial Countries: A Danger to ASEAN?

Full employment policies encouraged international and capital flow liberalization, enabling industrial countries to grow rapidly in the 1950s and 1960s and providing access to their markets to developing countries. The industrial countries' failure to adjust to rapid technological change, however, resulted in rising inflation and unemployment from the end of the 1960s. A wave of new protection against labour-intensive imports from developing countries followed in the 1970s. The growth of imports of clothing and textiles from ASEAN countries decelerated. Unemployment limited women's access to full-time work and was highly concentrated among young people, minority ethnic groups and older people. uFortress regionalism and calls for 'fair trade marked further protectionist reactions. Unemployment has become the industrial countries' principal economic problem. It is giving rise to political unrest in industrial countries and to difficulties in international that threaten the global trading environment. The growth of imports from developing countries, including ASEAN countries, and capital flows to them, have been reduced below their potential. The policy reforms being undertaken by most industrial countries are little and too late .

Latin America in the New World Order

Abstract. This paper argues that capitalism in its neoliberal form has begun to generate social forces of its own demise. The argument is constructed with reference to dynamics of adjustment and resulting conditions of social inequality and poverty in Latin America. Here it is argued that major means of internal adjustment involves restructuring of capital-labour relation. Parts four and five examine efforts in region to contain social discontent and forces of resistance and opposition to policies of structural adjustment, with particular reference to Mexico. These efforts are shown to be ineffective. Resume. Cet article avance que le capitalisme dans sa forme neoliberale engendre les forces de sa propre destruction. Ce raisonnement se fonde sur la reference aux dynamiques de l'ajustement structurel et les conditions sociales resultant de l'inegalite et de la pauvrete en Amerique Latine. On discuie du fait que les principaux moyens d'ajustement interne impliquent un changement radical dans la relation du capital et de la main d'oeuvre. Les parties IV et V examinent les efforts gouvernementaux dans la region pour enrayer le mecontentement social et les forces de resistance (et l'opposition aux politiques neoliberales d'ajustement) en tenant particulierement compte du Mexique. On en arrive a la conclusion que ces efforts sont vains. Introduction The collapse in 1989 of socialism in former USSR and Eastern Europe formed final chapter in what Francis Fukyama and some others view as the end of history, with reference to idea of freedom, instituted in political terms as liberal democracy and in economic terms as free market. (1) In Latin American context, this struggle for political and economic freedom has been associated with a neoliberal agenda of market-oriented economic reforms -- liberalisation of trade and capital flows, privatisation of public enterprises, deregulation of private activity, and a diminution if not end of state intervention in economy, with a cut-back in expenditures and other measures of fiscal austerity. (2) In 1970s, experiments with neoliberal reforms were instituted by several military regimes in Southern Cone (Chile, Argentina, Uruguay) in context of what later emerged as a dirty war against subversives, supporters of a process several decades in making -- incorporation of working class into national process of economic development. (3) All of these experiments were short-lived and failed. But in 1980s, in a very different context of a region-wide debt crisis, neoliberal policies of stabilisation and structural adjustment were reinstituted by a newly formed class of transnational capitalists and an intelligentsia of economic technocrats, under direction of International Monetary Fund, World Bank, and other organisations of international financial capital. (4) In this context, neoliberal agenda of structural adjustment and associated market reforms were imposed on country after country, and by end of decade only four countries in region had not opened up their economies to world economy -- liberalising imports and removing restrictions on movement of capital. And by early 1990s, despite apparent failure of Structural Adjustment Program (SAP) to place regional economy on a sustainable growth-path and clear evidence of its extraordinarily severe social costs (to quote from an Inter-American bank study), these countries (with exception of Cuba) jumped on neoliberal bandwagon. Even Brazil did so in 1995, under Presidency of Fernando Cardoso, a well-known sociologist who in years past had been a major exponent of a Marxist-oriented theory of Latin American dependency. In policy-making and intellectual circles, in both politics and academia all over world, there has emerged what Williamson (1990) has termed a Washington-Consensus on necessity of free market reforms, viz. …

Financial opening in developing countries

Many developing countries are currently considering liberalisation of external capital flows. While the ultimate objective of financial opening is to raise efficiency and growth, the reform process must be carefully designed to achieve these results. A recent conference has discussed the policy choices.

Trading Systems in European Stock Exchanges: Current Performance and Policy Options

Stock markets Marco Pagano and Ailsa Roell The deregulation of financial markets and the liberalization of international capital flows raises a number of challenging issues. Market participants and policy-makers are treading largely uncharted territories. This article offers some markers, exploring the implications of economic principles and producing new evidence on European stock exchanges. One vast set of issues concerns the design of market operations. The article compares the merits, both in theory and in practice, of auctions versus market-making, of concentration versus fragmentation of trading, of batch auctions versus continuous markets and of single- versus dual-capacity dealers. Policy conclusions are grounded on a detailed analysis of the experience accumulated on European and North American exchanges. Another theme runs through this article: the implications for the relative competitiveness of European financial markets. Rapid changes have already occurred in the late 1980s: while much wholesale trade has moved to London, continental exchanges have grown at an accelerated pace. We examine whether this is connected to innovations in trading systems and regulation. The paper also attempts to foresee the geographical structure of Europe's integrated stock markets. At stake is the hierarchy of financial centres, the potentially dangerous drift towards competitive deregulation and the scope for wholly computerized trading where market location becomes irrelevant.

Exchange controls and exchange rate policy in the South African economy

Because South Africa's balance of payments are vulnerable to changes in the gold price and to political crises, foreign exchange control and exchange rate policy is of crucial importance. The first section of this paper analyses the structure of the balance ofpayments and outlines the adjustments that are required to overcome shocks to both the current and capital accounts. The second section analyses recent exchange rate policy and argues that the policy preference for undervalued exchange rates has the effect of benejitting profits at the expense of wages. The third section looks at exchange control policy and the liberalisation of capital flows in the 1980s. Declining rates of profit and political uncertainty made it increasingly attractive for South African companies and individuals to invest abroad resulting in pressure for exchange control relaxation. Because access to international financial markets is uncertain, liberalisation does not appear to be appropriate for a country subject to volatile fli...

Japan's Trade Problem and the Yen

7he Japanese economy iis now at the crucial crossroads. The post-war policy of export-led, high-investment growth has resulted in a set of serious distortions and tensions both inside and outside of Japan. Domestically, the problems are inflation, paucity of social capital and social services, and environmental decay. The 1970 Economic White Paper prepared by Japan's Economic Planning Agency declared that the Japanese economy in the 1970s must strive for balance and harmony in the growth process. Specifically, it recommended that Japan move toward increasing the welfare of its citizens. The fruits of economic growth must be used positively for the construction of a truly affluent society with adequate provision of social services that enhance the quality of life. The White Paper further stated that the Japanese economy must become truly integrated with the world economy. It deplored the continued existence of protectionism in Japan, and recommended that the programs of further liberalization of imports and capital flows be pursued more vigorously.1 Prosperity of any nation today depends heavily on achieving and maintaining an economically harmonious relationship with the rest of the world. Because of Japan's paucity in natural resources, its reliance on other nations is especially high. It is an indisputable fact that for prosperity and even for survival, Japan needs foreign raw materials and foreign markets for its products. It is estimated that by 1975 more than 50% of almost all of its raw-material needs will have to be met with imports. The import de. pendency ratios will be 80% for copper, 90% for iron and coal, and 100% for petroleum, nickel and aluminum.2 In order to pay for the imported materials, Japan must export its products. Japan therefore cannot afford to lose its overseas markets, especially the important U.S. markets, to protectionism. This is the fundamental fact of the Japanese economic life.