Liberalization Of Capital Flows Research Articles

Pengaruh Liberalisasi Arus Modal terhadap Pertumbuhan Ekonomi ASEAN-5

This study aims to examine the relationship between capital flow liberalization and economic growth in ASEAN-5. This research is a quantitative study that uses data: GDP, Gross Capital Formation, financial disclosure seen from the Chinn-Ito index for the period 2000-2017 in 5 ASEAN countries namely Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Data were processed using panel data regression analysis and specifically for Indonesia, Partial Adjustment Model (PAM) regression was performed. The results of this study indicate that financial openness seen from the Chinn-Ito index has a negative and significant influence on the economic growth of ASEAN-5 countries. Capital flows have a positive and significant impact on the economic growth of ASEAN-5 countries. Meanwhile, the PAM (Partial Adjustment Model) regression model shows that capital flows have a positive and significant influence on Indonesia's economic growth both in the short and long term, while financial openness has a negative and significant impact on Indonesia's economic growth both in the short and long term.

Three aspects of the critical analysis of the bank of Russia’s activities

The article analyzes the policy of the Central Bank of Russia in three aspects: setting the key rate, the low level of monetization of Russia’s GDP and determining the causes of inflation. The transition of the Bank of Russia from a liberal to an ultra-liberal policy is proved, expressed in the policy of targeting inflation, the floating exchange rate of the ruble and the liberalization of cross-border capital flows. The logical error of the Central Bank in determining the consequences of raising the key rate is shown. It rises to stop the inflation of demand, and thus causes the inflation of production costs. As a result, the opposite effect is achieved – an increase in inflation. The same process is facilitated by maintaining a low level of GDP monetization and incorrectly determining the causes of inflation in Russia, which is non-monetary in nature in the country. The author concludes that in its policy of expensive money, the Central Bank relies more on political factors than economic ones.

Guidance Note on The Liberalization and Management of Capital Flows

Guidance Note on The Liberalization and Management of Capital Flows

Capital Movement Restrictions in EU Law: Retrospective and Modern Approaches, Development Trends

Summary This article addresses the issue of establishing the legal framework for freedom of capital movement in the EU, as well as the peculiarities of the current legal regulation of freedom of capital movement between EU Member States, as well as between them and third countries. Authors examine the issues of correlation between freedom of establishment and freedom of capital movement. The restrictions on capital movement between EU Member States and between them and third countries are characterized. The case law of Court of Justice of the European Union on key issues in this area is analysed. The main trends of capital flow restrictions at the present stage are outlined, such as those emerged amidst new realities, including the armed aggression of the Russian Federation against Ukraine, and its impact on the processes of capital flow liberalization in the EU.

Index of Economic Stability and Financial Integration of Small Open Countries

Over the recent decades, we have witnessed advanced processes of liberalization of capital flows, and increasing integration and globalization of financial markets. Along with the globalization trend, ever since the end of the 1980s, the process of financial integration has also been taking place, as a consequence of removing barriers to free movement of capital between countries. Therefore, this research explores financial integration of small open countries and aims to make conclusions on how this integration can affect their economic stability. Qualitative definitions of small countries point out that they typically have a limited territory, relatively small population and limited resources. The research hypothesis is postulated as follows: the economic stability index of small open countries is conditioned by their financial integration. The analysis includes small open countries of Southeast Europe observed from 2005 to 2020, with relevant statistical data used for the total inflow and outflow of investments, the share of assets and liabilities in gross domestic product and the calculated value of the economic stability index. The analysis was made using the methods of correlation analysis and correlation test. The results show that there is a correlation between financial integration and the economic stability index in small open countries.

Interdependence Between Liberalization of Capital Flows and Economic Growth of Small Open Countries

It is known that liberalization of capital flows may help countries achieve a faster growth, but also that, if not implemented gradually; it may lead countries into crisis and recession. In recent decades, many developed countries, as well as developing countries, have opened up their financial systems. In this way, they opened up to foreign competition and allowed the free movement of capital across their borders. The aforementioned phenomena arose as a consequence of the advanced processes of capital flow liberalization in these countries, as well as the increasing integration and globalization of financial markets. This problem is particularly important to investigate for small open countries, which due to their special characteristics have limited opportunities to act on the financial market. The general goal of the paper is to determine, based on theoretical and empirical scientific findings, the interdependence between the liberalization of capital flows and economic growth of small open countries. The research included small open countries of Southeast Europe in the period from 2005 to 2020. Correlation and regression analysis was used in the paper. Based on theoretical and empirical analysis, we came to the conclusion that there is a significant correlation between the liberalization of capital flows and economic growth of small open countries.

Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Capital Flows and Capital Flow Management Measures — Benefits and Costs

"Volume 2022 (2022): Issue 009 (Mar 2022): Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Capital Flows and Capital Flow Management Measures — Benefits and Costs" published on 30 Mar 2022 by International Monetary Fund.

Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Using the IPF Analytical Toolkit to Enhance Policy Assessments

"Volume 2022 (2022): Issue 012 (Mar 2022): Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Using the IPF Analytical Toolkit to Enhance Policy Assessments" published on 30 Mar 2022 by International Monetary Fund.

Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Principles for the Design of Measures to Address Systemic Risks from FX Mismatches

This note describes the key principles for the design and implementation of preemptive CFM/MPMs. These measures should be designed to be effective—so they achieve their intended goal and are not easily circumvented—and efficient—so they minimize distortions and costs. Preemptive CFM/MPMs should be targeted, calibrated to risks, transparent, and as temporary as possible. The appropriate design depends on country circumstances, such as institutional and legal constraints, as well as the precise source of the vulnerability. Where measures that do not discriminate by residency are available and effective, they should be preferred.

Review of The Institutional View on The Liberalization and Management of Capital Flows

Review of The Institutional View on The Liberalization and Management of Capital Flows

Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Assessing Systemic Financial Stability Risks Due to FX Mismatches

This note outlines the approach of the proposed revision to the Institutional View (IV) when assessing whether systemic financial stability risks are elevated due to foreign currency (FX) mismatches. The approach builds on the staff guidance regarding risk assessments in bilateral surveillance, while allowing for flexibility to draw on future advances in best practice. This note proposes a two-step approach to assess systemic risks from FX mismatches. This note is organized as follows. Section II outlines the sources of systemic risks stemming from FX debt and potential amplification channels. Section III outlines the risk assessment approach in practice and Section IV concludes.

ПІДВИЩЕННЯ ФІНАНСОВОЇ ВІДКРИТОСТІ УКРАЇНИ НА ШЛЯХУ ДО ЄВРОПЕЙСЬКОЇ ІНТЕГРАЦІЇ

Introduction. The article analyzes the changes in approaches to the small economies financial openness improvement. It takes into account the new challenges of global economic instability and the contradictions of the European integration requirements of financial openness in the conditions of global economic destabilization and highlights possible ways of overcome them. Materials and methods. To disclose the theoretical model of the interconnection between financial openness, financial stability and economic growth has been used system-functional and comparative economic-statistical analysis methods based on World Bank and IMF statistic data. Results and discussion. It is emphasized that there is a trend towards strengthening control over capital flows at the global level and the removal of restrictions on the movement of international capital flows is one of the key requirements for the approximation of regulatory norms in the field of financial sector for countries going to join the EU with the regulatory framework of the latter. Given the current conditions of global uncertainty and the threat of increasing financial instability, the EU's position on the free movement of capital flows at this stage may be significantly revised. Due to the current conditions, the requirement of free movement of capital flows contradicts with a list of requirements for the approximation of the characteristics of the financial sector of the candidate countries and the EU. The need for a capital flow control policy for small open economies wishing to join the EU at this stage is not just only the need of ensuring macroeconomic stability, but also to the convergence criteria of systems, in particular in terms of joining to ERM II and BEPS. Conclusions. In overall case of small open economies, in the context of the implementation of European norms and the approximation of regulatory framework in the financial sector, it is necessary to talk about the feasibility of controlling the international capital flows at the stage of building adequate institutional environment as a support measure for further transition to free exchange rate and capital flows liberalization. As a proposal, it is stated that the elimination of identified contradictions and the transition to the free capital movement in the interests of Ukraine's European integration requires proper development of the country's financial sector and, above all, its institutional environment. The implementation of appropriate practical measures for the institutional provision of financial openness should include a policy of control over the movement of capital flows, which combines the potential of fiscal, monetary and regulatory policies in different segments of financial markets as part of the macroprudential policy.

North Macedonia: Politics versus Policy of EU Integration

Abstract The accession of North Macedonia to the European Union (EU) has been at an impasse for 27 years due to the political dispute with Greece. In 2018, its resolution fuelled hopes that North Macedonia would finally start negotiations with the EU. Unfortunately, there was a new obstacle, as Bulgaria vetoed the talks in December 2020. Implicit to the latest political backlog, the efforts for further EU integration should be focused on the available policy instruments. The Stabilisation and Association Agreement (SAA) is a legally binding document which has already enabled trade liberalisation between the parties, stipulates the national treatment of business entities on the basis of reciprocity, aims for full liberalisation of capital and financial flows, and also provides other opportunities for integration. Placing the SAA in the spotlight of the mutual relations between the parties, based on proactivity from North Macedonia, could provide the impetus for more substantial EU integration of the country, despite the political stagnation of the process.

International financial integration in the presence of an international duopoly

We revisit the debate on the benefits of international financial integration. We build a partial equilibrium imperfectly competitive model with two countries, where each country has one firm. Firms are Cournot competitors. Within this framework, we examine how the liberalization of international capital flows affects the welfare of each country and their joint welfare. Our results show that international capital flows' liberalization cannot guarantee the improvement in each country's welfare and their joint welfare. Overall, we find that international financial integration has very heterogeneous effects, depending on the market size, the initial level of capital stock and the degree of product competition.

Toward an Integrated Policy Framework

Policymakers often face difficult tradeoffs in pursuing domestic and external stabilization objectives. The paper reflects staff’s work to advance the understanding of the policy options and tradeoffs available to policymakers in a systematic and analytical way. The paper recognizes that the optimal path of the IPF tools depends on structural characteristics and fiscal policies. The operational implications of IPF findings require careful consideration. Developing safeguards to minimize the risk of inappropriate use of IPF policies will be essential. Staff remains guided by the Fund’s Institutional View (IV) on the Liberalization and Management of Capital Flows.

Can China lead the change of the world?

Currently, the world system is in a state of complex crisis and transformation. The overall influence of its US-led centre has weakened, and most of the global periphery is in either chaos or misery. The mechanisms of the global accumulation of capital prevent new global leaders from emerging. Until now, China’s economic ascent has been based on managed market forces and sovereign monetary policy. However, if the liberalisation of capital flows in China continues, the country’s financial independence might be lost. This article explains how the nodal crisis of global capitalism has evolved, how far the marketisation and financial liberalisation of the Chinese economy has gone and the largest obstacles to China further strengthening its influence on the world order. The author concludes that China could play a positive role as a new superpower in constructing a world beyond capitalism, if it does not give up the socialist project, keeps market forces under control, maintains accumulation without dispossession, preserves its financial independence and makes alliances with other nations on the global (semi-)periphery. The latter is particularly important, as the present hegemonic centre will not give up its position peacefully.

Inner Workings of the Chinese Economy and the US–China Trade War

China has been touted as a unique success story in development economics. The world financial crisis of 2007–2010 impacted China severely. Its GDP growth slowed, corporate debts piled up, equity markets became volatile, the renminbi weakened, and its forex reserves shrank in the face of capital flight. This paper analyzes the policymakers’ approaches in coping with the recent external shocks to the economy noted for having rigid economic structures (such as the trilemma problem and privatization issues). It discusses the tough balancing act facing the policymakers and the various reform options, including capital flow liberalization and structural reform. Finally, the paper discusses the US–China trade war.

The (Subjective) Well-Being Cost of Fiscal Policy Shocks

Do discretionary spending cuts and tax increases hurt social well-being? To answer this question, we combine subjective well-being data covering over half a million of individuals across 13 European countries, with macroeconomic data on fiscal consolidations. We find that fiscal consolidations reduce individual well-being in the short run, especially when they are based on spending cuts. In addition, we show that accompanying monetary and exchange rate policies (disinflation, depreciations and the liberalization of capital flows) mitigate the well-being cost of fiscal consolidations. Finally, we investigate the well-being consequences of the two well-knowns expansionary fiscal consolidations episodes taking place in the 80s (in Denmark and Ireland). We find that even expansionary fiscal consolidations can have well-being costs. Our results may therefore shed some light on why some governments may choose to consolidate through taxes even at the cost of economic growth. Indeed, if spending cuts are to generate a large well-being loss, they can trigger an opposition and protest against a fiscal consolidation plan and hence making it politically costly.

The (Subjective) Well-Being Cost of Fiscal Policy Shocks

Do discretionary spending cuts and tax increases hurt social well-being? To answer this question, we combine subjective well-being data covering over half a million of individuals across 13 European countries, with macroeconomic data on fiscal consolidations. We find that fiscal consolidations reduce individual well-being in the short run, especially when they are based on spending cuts. In addition, we show that accompanying monetary and exchange rate policies (disinflation, depreciations and the liberalization of capital flows) mitigate the well-being cost of fiscal consolidations. Finally, we investigate the well-being consequences of the two well-knowns expansionary fiscal consolidations episodes taking place in the 80s (in Denmark and Ireland). We find that even expansionary fiscal consolidations can have well-being costs. Our results may therefore shed some light on why some governments may choose to consolidate through taxes even at the cost of economic growth. Indeed, if spending cuts are to generate a large well-being loss, they can trigger an opposition and protest against a fiscal consolidation plan and hence making it politically costly.

Testing the twin-deficits hypothesis and Feldstein-Horioka puzzle in Egypt during the period 1974-2018

The purpose of this paper is to test the twin-deficits hypothesis and the Feldstein-Horioka puzzle in Egypt during the period 1974-2018. Feldstein and Horioka (1980) postulate that if there is perfect capital mobility, correlation between domestic investment and savings should be very low. The results of the study rejected of the twin-deficits hypothesis, which is based on the existence of a positive relationship between the two deficits extending from the budget deficit to the current account deficit. However, the results confirmed the opposite, which is the existence of a long-term relationship between the two deficits, in which the current account deficit creates a budget deficit. As for the Feldstein-Horioka puzzle, the results confirmed the rejection of this puzzle in Egypt, as a large proportion of domestic investment was financed from foreign sources in light of the liberalization of foreign capital flows in Egypt.