Back Matter

Back Matter

Author(s):
Age Bakker, and Bryan Chapple
Published Date:
September 2002
    Share
    • ShareShare
    Show Summary Details
    Appendix I Chronology of Key Changes in Capital Account Restrictions in Selected Advanced Countries
    Australia
    1972
    SeptemberTShort-term overseas borrowing restricted
    DecemberTThose undertaking long-term overseas borrowing required to hold a non-interest-bearing deposit with the Reserve Bank of Australia
    1973
    MarchTRestrictions on inward investment in real estate imposed
    1977
    JulyLRequirement to hold a noninterest-bearing deposit with the Reserve Bank when borrowing overseas was suspended (and not reintroduced)
    1981
    JulyLMonetary limits on overseas investment in equity or real estate abolished
    1983
    DecemberLRestrictions on interest-bearing investments by nonresidents abolished
    1985LExchange rate floated
    JanuaryLMost remaining restrictions abolished
    OctoberLRestrictions on inward direct investment eased
    Austria
    1971
    MayTIntroduction of restrictions on capital inflows, including reserve requirement on increase to nonresident deposits of 25 percent (increased to 75 percent in August 1971)
    1975
    JarmarLSuspension of reserve requirement on increases in nonresident deposits
    1976
    JanuaryLAbolition of most restrictions on inward direct and portfolio investment
    1981
    AugustLPrior approval no longer required for a range of inward investment transactions
    1989
    FebruaryLMost remaining restrictions abolished
    1991
    NovemberLAbolition of all foreign exchange controls
    Belgium-Luxembourg
    1971
    MayTComplete separation of the official and the free exchange market
    1990
    MarchLAbolition of the dual exchange market
    Denmark
    1968
    JulyLLong-term offshore borrowing by companies permitted
    1973
    MarchLLiberalization of inward and outward portfolio and direct investment
    1974
    DecemberLNonresident purchase of quoted bonds permitted
    1979
    FebruaryTRestriction of purchases of Danish bonds by nonresidents
    TDenmark authorized by European Commission to invoke safeguard measures
    1983
    MayLEasing of restrictions on purchases of foreign securities and direct investment
    LAbrogation of safeguard measures
    1984
    JanuaryLAbolition of restrictions on purchase of foreign shares by residents
    1985
    JuneLFurther liberalization measures
    1988
    OctoberLAbolition of all remaining exchange control regulations
    European Economic Community (EEC)
    1958
    DecemberLLiquidation of the European Payments Union
    LEEC currencies become externally convertible in current payment transactions
    1960
    MayLAdoption by Council of First Directive on capital movements
    1962
    DecemberLAdoption by Council of Second Directive on capital movements
    1968
    JulyTFrance authorized by the European Commission to invoke safeguard measures (Decision 68/301/EEC)
    1972
    MarchTAdoption by Council of the directive on regulating international capital flows and neutralizing their undesirable effects on domestic liquidity (Directive 72/156/EEC)
    1980
    DecemberTIreland authorized by the Commission to invoke safeguard measures
    1984
    DecemberLCommission sets an expiration date for existing safeguard clauses for France (2 years) and Italy and Ireland (3 years), and limits safeguards to existing restrictions (Decisions 85/14, 15, and 16/EEC)
    1985
    NovemberTGreece authorized by the Commission to take certain safeguard measures for a period of three years (Decision 85/594/EEC)
    TAdoption by Council of directive (Directive 85/583/EEC) on undertakings for collective investments in transferable securities (UCITS)
    1986
    MayLCommission presents a program for liberalization of capital movements in European Community
    JuneLAbrogation of safeguard clause for France
    NovemberLAdoption by Council of Third Directive on capital movements (Directive 86/566/EEC)
    1987
    FebruaryLModification of existing safeguard clauses with respect to Greece, Ireland, and Italy to accommodate extension of liberalization obligations under the 1986 directive
    JulyLAbrogation of safeguard clause for Italy
    DecemberTSafeguard clause for Ireland is extended for one year (Decision 88/12/EEC)
    1988
    JuneLAdoption by Council of the Fourth Directive on capital movements (Directive 88/361/EEC)
    NovemberLAbrogation of safeguard clause for Ireland
    TAuthorization for Greece to take safeguard measures is extended until the end of 1989 (Decision 88/600/EEC)
    1989
    DecemberTFurther extension, for six months, of derogation enjoyed by Greece (Decision 89/644/EEC)
    Finland
    1958
    DecemberLAuthorized banks able to enter forward exchange contracts to cover merchandise trade risks
    1959
    MayLForeigners able to acquire Finnish listed shares and bonds provided transactions were handled by an authorized bank
    1961
    OctoberTRaising of trade-related credits of more than 6 months became subject to permission
    1968
    JanuaryLAbolition of restrictions on raising of trade-related credits and liberalization of foreign travel and emigrant allowances
    1973
    JanuaryLEasing of obligations to surrender foreign exchange receipts
    1982
    JuneLAuthorized banks able to take part in syndicates for foreign bank loans, and to finance such loans with foreign credit
    1984
    DecemberLIncrease in authorized bank’s ability to lend abroad, invest in foreign securities, and channel long-term foreign credit to domestic borrowers
    1985
    JuneTSale of markka-denominated bonds to nonresidents prohibited
    1986
    JuneLBan on sale of markka-denominated bonds to nonresidents eased
    AugustLManufacturing and shipping companies able to raise foreign credits
    1987
    JuneLEasing in restrictions on direct investment abroad
    AugustLAbility to raise foreign credits extended beyond manufacturing and shipping companies
    1988
    AugustLDirect investment abroad by (non financial) companies exempted from authorization
    1989
    SeptemberLPortfolio investment abroad by (non financial) companies permitted without limit
    LDirect investment in Finland no longer requires authorization
    1990
    FebruaryLSale of markka-denominated bonds to nonresidents allowed
    LNonresidents allowed to issue markka-denominated bonds in Finland
    JulyLAll restrictions on foreign investment by individuals abolished
    1991
    JanuaryLMost remaining restrictions abolished (including restrictions on short-term capital movements)
    OctoberLIndividuals and comparable corporate entities allowed to raise loans abroad
    France
    1958
    JuneLIn corporation of surcharge of 20 percent on official exchange rate in a new reference rate for U.S. dollar
    1959
    JuneLAbolition of 50 percent deposit on foreign exchange purchases by importers
    1960
    JanuaryLMonetary reform: introduction of the “new” franc, abolition of the Exchange Office
    1962
    FebruaryLEasing of foreign exchange allowances for travel purposes and other transactions in personal sphere
    AprilLAbolition of parallel devises-titres market for cross-border transactions by residents in foreign securities
    LFurther relaxation of exchange controls
    1963
    AprilTProhibition of payment of interest on French franc deposits held by nonresidents
    AugustTCurtailment of loans by nonresidents to residents
    1965
    OctoberLAbolition of restriction on commercial banks engaging in forward transactions
    1967
    JanuaryLIntroduction of positive system of exchange regulation
    JanuaryLSubstantial relaxation of exchange controls
    LAbolition of prohibition on paying interest on French franc deposits held by nonresidents
    1968
    MayTReintroduction of temporary exchange control and of restrictions on allowances for foreign travel by residents
    SeptemberLAbolition of exchange control measures introduced in May 1968
    NovemberTReintroduction of essentially the same exchange control measures as were applied in May 1968
    1969
    AugustTReintroduction of devises-titres market
    1970
    AugustLEasing of restrictions on outward direct investment and abolition of camel de change for foreign travel allowances
    1971
    AprilTImposition of minimum reserve requirement on external bank liabilities
    AugustTEstablishment of dual exchange market, comprising official market for import and export transactions and trade-related invisibles and financial franc market for all other transactions
    OctoberTMerger of devises-titres market into dual exchange market
    1973
    MarchTProhibition of paying interest on bank deposits of nonresidents
    TRaising of minimum reserve requirement on growth of external bank liabilities to 100 percent
    OctoberLAbolition of prohibition of payment of interest on bank deposits of nonresidents
    LAbolition of minimum reserve requirement on growth of external bank liabilities
    1974
    JanuaryTProhibition of French franc borrowing by nonresidents, restriction of forward transactions by residents, and relaxation of borrowing abroad by residents
    MarchTAbolition of the dual exchange market
    TSevere tightening of controls on capital outflows and relaxation of controls on capital inflows
    1980
    JulyLRestrictions on inward and outward direct investment relaxed
    1981
    MayTReintroduction to devises-titres market, limitations on leads and lags in trade settlements, and limitations on direct investment abroad
    1982
    MarchTFurther restrictions on surrender of export proceeds and on direct investment abroad
    1983
    MarchTFurther reduction of foreign travel allowances, a ban on use of personal credit cards abroad, and introduction of carnet de change, a booklet in which foreign exchange purchases were recorded
    DecemberLSome easing of limits on foreign travel allowances and foreign direct investment
    LAbolition of carnet de change
    1984
    JulyLAbolition of ban on use of personal credit cards abroad
    NovemberLEasing of controls on direct investment abroad
    1985
    FebruaryLEasing of inward direct investment originating from non-EEC countries
    AprilLAuthorization of Eurobond issues denominated in French francs
    SeptemberLEasing of financing rules for outward direct investment outside the European Community
    DecemberLEasing of regulations for outward portfolio and direct investment
    1986
    JanuaryLEasing of foreign travel allowances
    AprilLElimination of requirement of prior authorization of direct foreign investment
    MayLAbolition of devises-titres market, liberalization of purchases of secondary residences abroad, easing of forward foreign exchange operations, and easing of authorization procedures for direct investment abroad
    NovemberLPartial liberalization of bank lending in French francs to nonresidents
    LAbolition of administrative control through commercial banks of import and export settlements (domiciliation regime)
    1987
    MayLSubstantial easing of exchange controls for commercial enterprises
    LLiberalization of trade in gold
    JulyLAbolition of limits on tourist travel allowances
    1988
    JuneLPermission for domestic enterprises to operate foreign currency accounts
    LAbolition of restrictions on borrowing abroad
    1989
    MarchLFull liberalization of bank lending in French francs to nonresidents
    JuneLLiberalization of commercial banks’ foreign exchange positions
    LPermission granted for all residents to open ECU-denominated accounts
    1990
    JanuaryLAbolition to all remaining exchange control regulations (Decree 89/938)
    Germany, Federal Republic of
    1958
    JanuaryLPermission for residents to maintain foreign currency accounts abroad
    JulyLLiberalization of inward investment by nonresidents
    AugustLLiberalization of transactions in German bonds denominated in foreign currency
    1959
    MayLAbolition of all remaining restrictions on import of capital
    AugustLEasing of regulations concerning investment abroad by residents
    1960
    JuneTProhibition to pay interest on deutsche mark deposits held by nonresidents and to sell money market paper to nonresidents
    1961
    SeptemberLIntroduction of new Foreign Trade and Payments Law, establishing a positive system of exchange regulation
    1962
    JanuaryLMerger of free market for capital transactions with official exchange market
    1963
    MarchLAbolition of restrictions on investments in foreign securities by residents
    1965
    MarchTIntroduction of withholding tax (coupon tax) on interest income on assets held by nonresidents
    1966
    JanuaryLExtension of permission for outward direct investment to the OECD area (previously allowed only in EEC countries)
    1967
    NovemberLEasing of limitations on export of banknotes and on settlement requirements
    1968
    DecemberTImposition of minimum reserve requirement on growth of external bank liabilities
    1969
    OctoberLAbolition of minimum reserve requirement on growth of external bank liabilities
    1970
    AprilTReintroduction of minimum reserve requirement on growth of external bank liabilities
    1971
    MayTProhibition of payment of interest on bank deposits of nonresidents and of purchases by nonresidents of money market paper
    1972
    MarchTImposition of a cash reserve (Barde-pot) requirement for liabilities incurred vis-à-vis nonresidents
    JulyTProhibition of sales of fixed-interest securities to nonresidents
    TTightening of minimum reserve and Bardepot requirements
    1973
    FebruaryTProhibition of sales of all credit instruments to, and of borrowing from, nonresidents
    JuneTFurther tightening of minimum reserve and Bardepot requirements
    1974
    JanuaryLAbolition of minimum reserve requirement on growth of external bank liabilities
    FebruaryLReduction of Bardepot requirement and abolition of authorization requirements for sale to nonresidents of credit instruments other than domestic fixed-interest securities with maturity of less than 4 years
    SeptemberLAbolition of Bardepot requirement
    1975
    SeptemberLAbolition of prohibition on paying interest on deutsche mark deposits held by nonresidents
    LAbolition of authorization requirements for sales to nonresidents of securities with maturity of 2 to 4 years
    1977
    DecemberTReintraduction of authorization requirements for sales to nonresidents of securities with a maturity less than 4 years
    1978
    JanuaryTReintroduction of minimum reserve requirement on growth of external bank liabilities
    JuneLAbolition of minimum reserve requirement on growth of external bank liabilities
    1980
    MarchLRelaxation of restrictions on sale of short-term paper to nonresidents
    1981
    MarchLAll restrictions on sale of short-term deutsche mark paper to nonresidents abolished
    1984
    AugustLAbolition of coupon tax on interest income on assets held by nonresidents
    Ireland
    1977
    JuneTReimposition of reserve requirement (of 50 percent) on capital inflows with commercial banks
    1978
    DecemberTIn consequence of Ireland’s decision to participate in the EMS, exchange controls extended to the United Kingdom
    TAbolition of investment currency market
    1979
    SeptemberLEasing of restrictions on acquiring of foreign securities
    1988
    JanuaryLEasing of restrictions on long-term outflows
    1989
    JanuaryLLiberalization of purchases of medium- and long-term foreign securities by residents
    1990
    AprilLFurther relaxation and easing of administrative requirements
    1992
    JanuaryLEasing of restrictions on purchases of foreign securities, borrowing in foreign currency, and extending loans to nonresidents
    1993
    JanuaryLAbolition of all remaining exchange control regulations
    Italy
    1972
    JuneTIntroduction of measures aimed at restricting capital outflows, ban on net external credit position of banks, and suspension of external convertibility of Italian banknotes
    1973
    JanuaryTEstablishment of dual exchange market
    JulyTIntroduction of 50 percent compulsory non-interest-bearing deposit scheme with respect to most capital outflows
    1974
    MarchLAbolition of dual exchange market
    MayTIntroduction of temporary compulsory non-interest-bearing deposit scheme with respect to imports, excluding raw materials, oil, and investment goods
    TItaly authorized by the Commission to invoke safeguard measures (Decision 74/287/EEC)
    1976
    MarchTReintroduction of compulsory bank financing in foreign exchange for advance settlement of imports
    MayTReintroduction of the non-interest-bearing import-deposit scheme
    OctoberTImposition of temporary special tax on purchases of foreign currency and payments abroad
    TExtension of compulsory import-deposit scheme
    1977
    FebruaryLExpiration of special tax on foreign currency purchases
    AprilLAbolition of compulsory import-deposit scheme
    1981
    MayTReintroduction of non-interest-bearing deposit scheme with respect to purchases of foreign currency by residents
    1982
    FebruaryLAbolition of the advance deposit scheme
    1983
    DecemberLCertain direct investment abroad is exempted from the 50 percent non-interest-bearing deposit requirements
    1984
    DecemberLReduction of compulsory zero-deposit requirements on portfolio investment abroad
    1985
    OctoberLAbolition of compulsory deposit requirement for direct investment abroad
    LResidents’ foreign exchange deposits made freely convertible into other currencies and ban on transfer of foreign securities and loans between residents lifted
    LReduction of compulsory deposit requirements on other transactions
    1986
    AugustLRestoration of external convertibility of Italian banknotes
    1987
    MarchTIntroduction of reserve requirement on bank deposits in foreign currency
    MayLAbolition of non-interest-bearing deposit requirement for investment abroad in securities and real estate
    SeptemberTShortening of holding periods of foreign currencies
    1988
    JuneLRestrictions on tourist spending eased
    OctoberLIntroduction of a positive system of exchange control
    LSignificant relaxation of controls
    1990
    JanuaryLAbolition of restrictions on purchases of foreign securities by residents
    MayAbolition of all remaining exchange control regulations
    Japan
    1960
    JuneLControls on foreign direct investment eased
    JulyLIntroduction of nonresident free yen accounts
    1967
    JulyLFurther easing in foreign direct investment regulations
    1971
    JulyLRestrictions on outward direct and portfolio investment eased
    SeptemberTRestrictions on yen conversion of advance export receipts
    1972
    JuneTMarginal reserve requirement imposed on nonresident free yen accounts
    OctoberTRestrictions on the purchase of Japanese securities by nonresidents
    NovemberLRestrictions on portfolio outflows eased further
    1973
    NovemberLEasing of restrictions on advance receipt of export payments
    NovemberTAcquisition of foreign short-term (maturity of less than six months) securities by residents restricted
    DecemberLEasing of restrictions on purchase of Japanese securities and lowering of marginal reserve requirement on nonresident free yen accounts
    1974
    JanuaryTTightening of portfolio outflow restrictions, including voluntary restraints on institutional investors
    AprilTJapanese banks instructed not to finance “non-urgent” foreign direct investment
    SeptemberLMarginal reserve requirement on nonresident free yen accounts abolished
    1977
    MarchLAbolition of “voluntary restraints” on banks’ purchase of foreign securities
    JuneLRestrictions on foreign currency accounts of residents eased
    JuneTReserve requirements introduced on foreign currency liabilities of foreign exchange banks, residents’ external foreign currency deposits, and nonresident free yen accounts.
    1978
    MarchTMarginal reserve requirement on nonresident free yen accounts increased, further restrictions placed on portfolio inflows
    1979
    FebruaryLMarginal reserve requirement on nonresident free yen accounts abolished
    FebruaryLRestrictions on nonresident purchase of bonds eased
    MayLEasing of restrictions on portfolio flows
    1980
    MarchLEasing of restrictions on portfolio inflows
    DecemberLRevision of Foreign Exchange and Foreign Trade Control Law
    1983
    JuneLLiberalization of short-term Euroyen lending by Japanese banks
    1984
    AprilLAbolition of requirement to link forward exchange transactions to trade
    MayLPublication of Report on Yen/Dollar Exchange Issues
    JuneLFurther easing of portfolio flows
    1985
    MayLAbolition of prior notification requirement for residents undertaking short-term borrowing in Euroyen
    1986
    AugustLEasing of limits on offshore investment by institutional investors
    DecemberLJapanese Offshore Market (JOM) opened
    1989
    AprilLEasing of restrictions on flows of funds between JOM and domestic markets
    1991
    AprilLRestrictions on inward foreign direct investment eased
    1998
    AprilLIntroduction of Foreign Exchange and Foreign Trade Control Law
    Netherland
    1958
    JulyLIssuance of general licenses for a number of types of outward capital movements
    1961
    OctoberLFurther relaxation of exchange controls
    1963
    DecemberLOpening up of Netherlands capital market for issuance of foreign guilder loans up to a ceiling
    1966
    OctoberLAbolition of “free market” for cross-border transactions in securities
    1971
    SeptemberTIntroduction of free market for bond transactions (“0-circuit”)
    1972
    MarchTProhibition of payment of interest on guilder deposits held by non-residents
    1972
    JulyTFurther tightening of exchange controls, affecting leads and lags and the taking up of foreign credit by residents
    1974
    FebruaryLAbolition of closed bond circuit
    1976
    JanuaryLAbolition of prohibition on paying interest on guilder deposits held by nonresidents
    1977
    SeptemberLSwitch over to a positive system of exchange control
    LFurther easing of regulations concerning capital outflows
    1981
    MayLComing into force of the External Financial Relations Act, which supersedes the Exchange Control Decree of 1945
    1983
    JulyLAbolition of all remaining restrictions on capital inflows
    1986
    OctoberLAbolition of all remaining restrictions on capital outflows
    LFull liberalization of all capital transactions.
    New Zealand
    1968
    JanuaryTBorrowing in New Zealand by foreign companies resident in New Zealand and offshore borrowing by New Zealand companies require approval in all cases
    1973
    JuneTRestrictions on overseas borrowing by New Zealand companies tightened
    1974
    AugustLFinancial institutions allowed to borrow offshore for industrial development
    1983
    JanuaryTRestrictions on dealing in foreign exchange tightened
    1984
    NovemberLAll restrictions on access of foreign-owned companies operating in New Zealand to domestic capital markets abolished
    LFinancial institutions permitted to borrow abroad
    DecemberLAll controls on both inward and outward foreign exchange transactions abolished
    LRules limiting offshore borrowing eased
    1985
    MarchLThe New Zealand dollar floated
    OctoberLPermission no longer required for offshore borrowing
    LRules limiting foreign companies borrowing or issuing share capital in New Zealand abolished
    1989
    AugustLInward direct investment rules eased
    Portugal
    1989
    MarchLRelaxation of foreign travel allowances
    SeptemberLRelaxation of controls on purchases of foreign securities by residents
    DecemberLAbolition of prior authorization requirement of inward direct investment
    1990
    MarchLEasing of restrictions on acquisition of foreign securities
    1991
    JuneLLiberalization of direct and portfolio investment abroad
    1992
    SeptemberLAbolition of compulsory deposit requirement against foreign currency
    DecemberLAbolition of all remaining exchange control regulations
    Spain
    1986
    JuneLLiberalization of inward direct investment and right of establishment
    NovemberLRelaxation of controls on outward direct investment
    1987
    OctoberLRelaxation of controls on foreign currency operations by commercial banks
    1988
    DecemberLLiberalization of outward direct investment and trade in medium-and long-term foreign securities
    1989
    JanuaryTImposition of nonremunerated reserve requirement on financial credits taken up abroad
    SeptemberLPermission granted for residents to open accounts denominated in ECUs
    1990
    AprilLFurther relaxation measures
    1991
    AprilLAbolition of restrictions on opening of foreign currency accounts
    1992
    FebruaryLAbolition of all remaining exchange control regulations
    SeptemberTReintroduction of certain restrictions, mainly with respect to short-term financial credits
    NovemberLAbolition of all remaining exchange control regulations
    Sweden
    1979
    JanuaryLForeign-currency borrowing via banks permitted for trade financing
    1980
    JuneLLiberalization of controls on forward exchange dealing
    1981LConditions for financing direct investment abroad from within Sweden made less restrictive
    1983
    AprilLTrading of foreign shares permitted on Swedish stock market
    1984
    FebruaryLEasing of restrictions on offshore borrowing by enterprises and local authorities
    1985
    MarchLRestrictions on forward dealing further liberalized
    1986
    JuneLAbolition of requirement to finance outward direct investment using foreign currency loans
    1987
    JanuaryLFurther easing of restrictions on foreign exchange and forward transactions
    NovemberLEasing of restrictions on the purchase of foreign shares
    DecemberLEasing of restrictions on inward and outward direct investment
    1989
    JuneLAbolition of almost all remaining exchange controls
    1990
    DecemberLBranches of foreign banks permitted to participate in Riksbank’s clearing system on the same terms as Swedish banks
    Switzerland
    1971
    JulyTImposition of 100 percent reserve requirement on marginal increases in nonresident deposit, and ban on interest payments on new nonresident deposits
    1972
    JulyTRestrictions on residents’ offshore borrowing imposed, nonresident purchase of securities and real estate prohibited, and “negative” interest rate introduced on marginal nonresident deposits
    1973
    OctoberLSuspension of negative interest rate on nonresident deposits
    1974
    NovemberTReintroduction of negative interest rate
    1978
    FebruaryTRestrictions placed on imports of foreign banknotes and purchase of domestic securities by foreigners
    AprilTScope of deposits to which negative interest rate applied widened
    1979
    JanuaryLAbolition of restrictions on imports of foreign bank notes and on purchase of domestic securities by foreigners
    MayLLicensing of residents’ offshore borrowing abolished
    DecemberLSuspension of negative interest rate on nonresident deposits
    1980
    FebruaryLBan on payment of interest on nonresident savings accounts lifted
    AugustLAbolition of remaining restrictions on payment of interest on nonresident deposits
    1982
    JanuaryLEasing of issue requirements for foreign bonds
    1984
    JanuaryLLimits on foreign bond issues raised
    1985
    MayLLimits on foreign bond issues abolished
    United Kingdom
    1958
    DecemberLSterling becomes convertible
    1961
    JulyTRestrictions on direct investment outside sterling area introduced
    1967
    AprilLEasing of restrictions on repatriation of nonresidents’ capital
    1971
    AugustTIntroduction of controls on portfolio inflows
    DecemberLAbolition of controls on portfolio inflows
    1975
    JulyTEasing of capital controls vis-à-vis EEC members postponed
    1976
    NovemberTRestrictions on banks’ financing trade between countries other than the United Kingdom imposed, conversion of foreign currency bills into sterling by banks no longer permitted
    DecemberTMonitoring of sales of foreign currency for sterling tightened
    1977
    OctoberLEasing of restrictions on sterling borrowing to fund inward direct investment and also on travel allowances for residents
    DecemberLEasing of capital outflows to other EEC countries
    1978
    JuneLEasing of restrictions on resident institutional investors investing in foreign currency securities
    1979
    JanuaryLRestrictions on sterling lending to nonresident-controlled companies operating in the United Kingdom largely abolished
    JuneLEasing of restrictions on outward capital flows
    JulyLAll restrictions on outward direct investment abolished and outward portfolio investment significantly liberalized
    OctoberLThe Exchange Control Act of 1947 suspended and all remaining barriers to inward and outward flows of capital removed
    LAbolition of remaining exchange controls
    United States
    1963
    JulyTAnnouncement of introduction of Interest Equalization Tax (enacted 1964)
    1965
    MarchTIntroduction of voluntary guidelines limiting foreign lending and investment
    1968
    JanuaryTGuidelines limiting foreign direct investment made mandatory
    1974
    JanuaryLAbolition of capital controls, including voluntary guidelines
    Bibliography

      Alesina, Alberto, VittorioGrilli, and Gian MariaMilesi-Ferretti, 1993, “The Political Economy of Capital Controls,”CEPR Discussion Paper No. 793 (London: Center for Economic Policy Research).

      Alworth, J.S., 1993, “The Globalization of Financial Markets and the Implications for Tax Policy” (Paris: Organization for Economic Cooperation and Development).

      Argy, Victor, 1987, “International Financial Liberalization—The Australian and Japanese Experiences Compared,”Bank of Japan Monetary and Economic Studies,Vol. 5 (May), pp. 10567.

      Argy, Victor, and LeslieStein, 1997, The Japanese Economy (New York: New York University Press).

      Ariyoshi, Akira, and others, 2000, Capital Controls: Country Experiences with Their Use and Liberalization, IMF Occasional Paper No. 190 (Washington: International Monetary Fund).

      Artis, Michael J., and Mark P.Taylor, 1989, “Abolishing Exchange Control: the U.K. Experience,”Greek Economic Review,Vol. 11 (June), pp. 1948.

      Australian Financial System Committee of Inquiry,1981, “Australian Financial System: Final Report of the Committee of Inquiry,” Parliamentary Paper 1981/208 (Canberra: Australian Government Publications Service).

      Bacchetta, Philippe, 1996, “Capital Controls and the Political Discount: The Spanish Experience in the Late 1980s,”Open Economies Review,Vol. 7 (October), pp. 34969.

      Bakker, Age F. P., 1994, “The Dutch Attitude Toward Capital Liberalization,” in Monetary Stability through International Cooperation,ed. byAge F.P.Bakker and others (ed) (Dordrecht and Boston: Kluwer Academic Publishers).

      Bakker, Age F. P., 1996, The Liberalization of Capital Movements in Europe, The Monetary Committee and Financial Integration, 1958-1994 (Dordrecht and Boston: Kluwer Academic Publishers).

      Bank for International Settlements,1997, “Monetary Policy in the Nordic Countries: Experiences Since 1992,” BIS Policy Papers, No. 2 (Basel).

      Bank of England, 1967, “The U.K. Exchange Control: A Short History,”Quarterly Bulletin,Vol. 7, No. 3, pp. 24560.

      Bank of England,1976, “The Investment Currency Market,”Quarterly Bulletin,Vol. 16, No. 3, pp. 31422.

      Bank of England,1977, A Guide to United Kingdom Exchange Control (London).

      Bank of England,1981, “The Effects of Exchange Control Abolition on Capital Flows,”Quarterly Bulletin,Vol. 21, No. 3, pp. 36973.

      Barker, Kate, AndrewBritton, and RobinMajor, 1984, “Macroeconomic Policy in France and Britain,”National Institute Economic Review, No. 110 (November), pp. 6884.

      Bartolini, Leonardo, and GordonM. Bodnar, 1992, “An Analysis of the Process of Capital Liberalization in Italy,”IMF Working Paper 92/27 (Washington: International Monetary Fund).

      Bhagwati, Jagdish, 1978, Anatomy and Consequences of Exchange Control Regimes (Cambridge, Massachusetts: Ballinger).

      Bishop, Graham, and AnnO’Kelly, 1992, Capital Liberalization: The End of the ERM and the Beginning of EMU (London: Salomon Brothers).

      Michael D. Bordo Dominique Simaro Eugene White 1994, “France and the Bretton Woods International Monetary System: 1960-1968,”NBER Working Paper No. 4642 (Cambridge, Massachusetts: National Bureau of Economic Research).

      Carey, D. A., and K.G.Duggan, 1986, “The Abolition of Exchange Controls,” in Financial Policy Reform (Wellington: Reserve Bank of New Zealand).

      Claassen, Emil-Maria, and CharlesWyplosz, 1982, “Capital Controls: Some Principles and the French Experience,”Annales de l’INSEE,Vols. 47-48 (July/December), pp. 23777.

      Commission of the European Communities,1985, Completing the Internal Market: White Paper from the Commission to the European Council (Luxembourg: Office for Official Publications of the European Communities).

      Commission of the European Communities,1988, “Creation of a European Financial Area,” European Economy, No. 36 (May) pp. 3209.

      Conti, Vittorio, and RonyHamaui, eds., 1993, Financial Markets Liberalization and the Role of Banks (Cambridge and New York: Cambridge University Press).

      Davanne, Olivier, and HeleneEwenczyk, 1989, “Mouvements de Capitaux et Crises de Change au debut des Années Quatre-vingt,”Economie et Prevision, No. 90 (July/August), pp. 13140.

      de Boissieu, Christian, 1988, “Financial Liberalization and the Evolution of the EMS,” European Economy, No. 36 (May), pp. 5370.

      Demirgüç-Kunt, Asli, and EnricaDetragiache, 1998, “Financial Liberalization and Financial Fragility,”IMF Working Paper 98/83 (Washington: International Monetary Fund).

      DeutscheBundesbank, 1979, “Die D-Mark als Internationale Anlagewahrung,”Monatsberichte,Vol. 31 (November), pp. 2634.

      DeutscheBundesbank, 1985, “Zur Freizugigkeit im Kapitalverkehr der Bundesrepublik mit dem Ausland,”Monatsberichte,Vol. 37 (July), pp. 1324.

      Dooley, Michael P., and PeterIsard, 1980, “Capital Controls, Political Risk, and Deviations from Interest-Rate Parity,”Journal of Political Economy,Vol. 88, No. 2, pp. 37084.

      Drees, Burkhard, and CeylaPazarbasioǧlu, 1998, The Nordic Banking Crises: Pitfalls in Financial Liberalization?, IMF Occasional Paper No. 161 (Washington: International Monetary Fund).

      Edey, Malcolm, and KetilHviding, 1995, “An Assessment of Financial Reform in OECD Countries,”OECD Economics Department Working Paper No. 154 (Paris: Organization for Economic Cooperation and Development).

      Eichengreen, Barry, and CharlesWyplosz, 1993, “The Unstable EMS,” Brookings Papers on Economic Activity: 1, Brookings Institution, pp. 51143.

      European Economic Community, Monetary Committee, 1958-87,Annual Activity Report (Brussels/Luxembourg).

      Evans, Lewis, and others,1996, “Economic Reform in New Zealand, 1985-95: The Pursuit of Efficiency,”Journal of Economic Literature,Vol. 34 (December), pp. 1856902.

      Fair, Donald E., and Christian deBoissieu, eds., 1988, International Monetary and Financial Integration: The European Dimension (Dordrecht and Boston: Kluwer Academic Publishers).

      Fieleke, Norman S., 1994, “International Capital Transactions: Should They Be Restricted?,”New England Economic Review, Federal Reserve Bank of Boston (March/April), pp. 2739.

      Fischer, Bernhard, and HelmutReisen, 1992, “Toward Capital Account Convertibility,” OECD Development Center Policy Brief No. 4 (Paris: Organization for Economic Cooperation and Development).

      Frankel, Jeffrey A., 1984, “The Yen/Dollar Agreement: Liberalizing Japanese Capital Markets,” Policy Analyses in International Economics No. 9 (Washington: Institute for International Economics).

      Fukao, Mitsuhiro, 1990, “Liberalization of Japan’s Foreign Exchange Controls and Structural Changes in the Balance of Payments,”Bank of Japan Monetary and Economic Studies,Vol. 8 (September), pp. 10165.

      Galy, Michel, 1988, “La Place du Contrôle des Mouvements de Capitaux dans la Politique Economique Francaise et les Perspectives Lieés à son Allégement,” in International Monetary and Financial Integration: The European Dimension,ed. byDonald E.Fair and Christian deBoissieu (ed) (Dordrecht and Boston: Kluwer Academic Publishers).

      Galy, Michel, GonzaloPastor, and ThierryPujol, 1993, Spain: Converging with the European Community, IMF Occasional Paper No. 101 (Washington: International Monetary Fund).

      Gold, Joseph, 1977, International Capital Movements under the Law of the International Monetary Fund, IMF Pamphlet Series, No. 21 (Washington: International Monetary Fund).

      Daniel Gros Niels Thygesen 1992, “Capital Controls and Foreign Exchange Market Crises in the EMS,”European Economic Review, No. 36 (December), pp. 153344.

      Gupta, Kanhaya L., 1997, Experiences with Financial Liberalization (Dordrecht and Boston: Kluwer Academic Publishers).

      Hald, Jens, and CarstenFreiberg-Jensen, 1986, “Foreign Exchange Liberalization and Capital Movements,”Monetary Review,Danmarks Nationalbank,Vol. 24 (February), pp. 918.

      Hewson, John, and EisukeSakakibara, 1977, “The Effectiveness of German Controls on Capital Inflows,” Weltwirtschaftliches Archiv, Band 113, Heft 4, pp. 64566.

      Hoshi, Takeo, 2000, “What Happened to Japanese Banks?,”IMES Discussion Paper No. 2000-E-7 (Tokyo: Institute for Monetary and Economic Studies, Bank of Japan).

      International Monetary Fund,Annual Report on Exchange Arrangements and Exchange Restrictions (Washington), various issues.

      Ito, Takatoshi, 1986, “Capital Controls and Covered Interest Parity Between the Yen and the Dollar,”Economic Studies Quarterly, Japan Association of Economics and Econometrics,Vol. 37 (September), pp. 22341.

      Ito, Takatoshi, 1992, The Japanese Economy (Cambridge, Massachusetts: MIT Press).

      Ito, Takatoshi, and Anne O.Krueger, eds., 2000, The Role of Foreign Direct Investment in East Asian Economic Development (Chicago: University of Chicago Press).

      Jonassen, Morten, and AudunGleinsvik, 1992, “The Crisis in the Norwegian Financial Industry: Action Taken in 1991,”Norges Bank Economic Bulletin,Vol. 63 (March), pp. 4453.

      Jonung, Lars, 1986, “Financial Deregulation in Sweden,”Skandinaviska Enskilda Banken Quarterly Review, No. 4, pp. 10919.

      Kanaya, Akihiro, and DavidWoo, 2000, “The Japanese Banking Crisis of the 1990s: Sources and Lessons,”IMF Working Paper 00/7 (Washington: International Monetary Fund).

      Mathieson, Donald J., and LilianaRojas-Suarez, 1993, Liberalization of the Capital Account: Experiences and Issues, IMF Occasional Paper No. 103 (Washington: International Monetary Fund).

      McKinnon, Ronald I., 1973, Money and Capital in Economic Development (Washington: Brookings Institution).

      McKinnon, Ronald I., 1993, The Order of Economic Liberalization: Financial Control in the Transition to a Market Economy,2nd ed. (Baltimore: Johns Hopkins University Press).

      National Bank of Belgium,1992, “The Operation of the Two-Tier Foreign Exchange Market: The Experience and Its Lessons” (unpublished; Brussels: National Bank of Belgium).

      Neely, Christopher J., 1999, “An Introduction to Capital Controls,”Federal Reserve Bank of St. Louis Review,Vol. 81 (November/December), pp. 1330.

      Organization for Economic Cooperation and Development (OECD),1982, “Controls on International Capital Movements: The Experience with Controls on International Financial Credits, Loans and Deposits,” Financial Market Trends, No. 113 (November).

      Organization for Economic Cooperation and Development (OECD),1990, “Liberalization of Capital Movements and Financial Services in the OECD Area” (Paris).

      Organization for Economic Cooperation and Development (OECD), and Center for Cooperation with European Economies in Transition, 1993, Exchange Control Policy (Paris).

      Osugi, K., 1990, “Japan’s Experience of Financial Deregulation Since 1984 in an International Perspective,” BIS Economic Papers,No. 26 (Basel: Bank for International Settlements).

      Quintyn, Marc, 1993, “Managing Monetary Policy Reforms: Lessons from the French Experience,”BNL Quarterly Review, Banca Nazionale del Lavoro, No. 186 (September), pp. 27598.

      Quirk, Peter J., and OwenEvans, 1995, Capital Account Convertibility: Review of Experience and Implications for IMF Policies, IMF Occasional Paper No. 131 (Washington: International Monetary Fund).

      Reserve Bank of New Zealand,1985, “Annual Report and Statement of Accounts” (Wellington).

      Silverstone, Brian, AlanBollard, and RalphLattimore, eds., 1996, A Study of Economic Reform: The Case of New Zealand (Amsterdam: Elsevier).

      Spencer, Grant, 1992, “Monetary Policy: The New Zealand Experience, 1985-1990,” in Monetary Policy and the New Zealand Financial System,3rd ed. (Wellington: Reserve Bank of New Zealand).

      Steinherr, Alfred, and Geoffrey deSchrevel, 1988, “Liberalization of Financial Transactions in the Community with Particular Reference to Belgium, Denmark, and the Netherlands,”European Economy, No. 36 (May), pp. 11747.

      Swoboda, Alexander, 1976, Capital Movements and Their Control: Proceedings of the Second Conference of the International Center for Monetary and Banking Studies, Geneva (Leiden: A.W. Sijthoff).

      Takeda, Masahiko, and PhilipTurner, 1992, “The Liberalization of Japan’s Financial Markets: Some Major Themes,” BIS Economic Papers, No. 34 (November) (Basel: Bank for International Settlements).

      Thomson, Graeme, 1991, “Prudential Lessons,” in The Deregulation of Financial Intermediaries: Proceedings of a Conference,ed. byIanMacfarlane (ed) (Sydney: Reserve Bank of Australia).

      von Furstenberg, George M., 1998, “From Worldwide Capital Mobility to International Financial Integration: A Review Essay,”Open Economies Review,Vol. 9 (January), pp. 5384.

      White, William R., 2000, “Recent Initiatives to Improve the Regulation and Supervision of Private Capital Flows,” BIS Working Papers, No. 92 (Basel: Bank for International Settlements).

      Williamson, John, and MollyMahar, 1998, A Survey of Financial Liberalization, Essays in International Finance, No. 211 (Princeton, New Jersey: International Finance Section, Princeton University).

      Wyplosz, Charles, 1986, “Capital Controls and Balance of Payments Crises,”Journal of International Money and Finance, No. 5 (June), pp. 16779.

      Wyplosz, Charles, 1988, “Capital Flow Liberalization and the EMS: A French Perspective,” European Economy, No. 36 (May), pp. 87103.

    Recent Occasional Papers of the International Monetary Fund

    214. Advanced Country Experiences with Capital Account Liberalization, by Age Bakker and Bryan Chapple. 2002.

    213. The Baltic Countries: Medium-Term Fiscal Issues Related to EU and NATO Accession, by Johannes Mueller, Christian Beddies, Robert Burgess, Vitali Kramarenko, and Joannes Mongardini. 2002.

    212. Financial Soundness Indicators: Analytical Aspects and Country Practices, by V. Sundararajan, Charles Enoch, Armida San José Paul Hilbers, Russell Krueger, Marina Moretti, and Graham Slack. 2002.

    211. Capital Account Liberalization and Financial Sector Stability, by a staff team led by Shogo Ishii and Karl Habermeier.2002.

    210. IMF-Supported Programs in Capital Account Crises, by Atish Ghosh, Timothy Lane, Marianne Schulze-Ghattas, Aleš Bulíř, Javier Hamann, and Alex Mourmouras. 2002.

    209. Methodology for Current Account and Exchange Rate Assessments, by Peter Isard, Hamid Faruqee, G. Russell Kincaid, and Martin Fetherston. 2001.

    208. Yemen in the 1990s: From Unification to Economic Reform, by Klaus Enders, Sherwyn Williams, Nada Choueiri, Yuri Sobolev, and Jan Walliser. 2001.

    207. Malaysia: From Crisis to Recovery, by Kanitta Meesook, II Houng Lee, Olin Liu, Yougesh Khatri, Natalia Tamirisa. Michael Moore, and Mark H. Krysl. 2001.

    206. The Dominican Republic; Stabilization, Structural Reform, and Economic Growth, by Alessandro Giustiniani, Werner C. Keller, and Randa E. Sab. 2001.

    205. Stabilization and Savings Funds for Nonrenewable Resources, by Jeffrey Davis, Rolando Ossowski, James Daniel, and Steven Barnett. 2001.

    204. Monetary Union in West Africa (ECOWAS): Is It Desirable and How Could It Be Achieved? by Paul Masson and Catherine Pattillo. 2001.

    203. Modem Banking and OTC Derivatives Markets: The Transformation of Global Finance and Its Implications for Systemic Risk, by Garry J. Schinasi, R. Sean Craig, Burkhard Drees, and Charles Kramer. 2000.

    202. Adopting Inflation Targeting: Practical Issues for Emerging Market Countries, by Andrea Schaechter, Mark R. Stone, and Mark Zelmer. 2000.

    201. Developments and Challenges in the Caribbean Region, by Samuel Itam, Simon Cueva, Erik Lundback, Janet Stotsky, and Stephen Tokarick. 2000.

    200. Pension Reform in the Baltics: Issues and Prospects, by Jerald Schiff, Niko Hobdari, Axel Schimmelpfennig, and Roman Zytek. 2000.

    199. Ghana: Economic Development in a Democratic Environment, by Sèrgio Pereira Leite, Anthony Pellechio, Luisa Zanforlin, Girma Begashaw, Stefania Fabrizio, and Joachim Harnack, 2000.

    198. Setting Up Treasuries in the Baltics, Russia, and Other Countries of the Former Soviet Union: An Assessment of IMF Technical Assistance, by Barry H. Potter and Jack Diamond. 2000.

    197. Deposit Insurance: Actual and Good Practices, by Gillian G.H. Garcia. 2000.

    196. Trade and Trade Policies in Eastern and Southern Africa, by a staff team led by Arvind Subramanian, with Enrique Gelbard, Richard Harm sen, Katrin Elborgh-Woytek, and Piroska Nagy. 2000.

    195. The Eastern Caribbean Currency Union—Institutions, Performance, and Policy Issues, by Frits van Beek, Josè Roberto Rosales, Mayra Zermeiio, Ruby Randall, and Jorge Shepherd. 2000.

    194. Fiscal and Macroeconomic Impact of Privatization, by Jeffrey Davis, Rolando Ossowski, Thomas Richardson, and Steven Barnett. 2000.

    193. Exchange Rate Regimes in an Increasingly Integrated World Economy, by Michael Mussa, Paul Masson, Alexander Swoboda, Esteban Jadresic, Paolo Mauro, and Andy Berg. 2000.

    192. Macroprudential Indicators of Financial System Soundness, by a staff team led by Owen Evans, Alfredo M. Leone, Mahinder Gill, and Paul Hilbers. 2000.

    191. Social Issues in IMF-Supported Programs, by Sanjeev Gupta, Louis Dicks-Mireaux, Ritha Khemani, Calvin McDonald, and Marijn Verhoeven, 2000.

    190. Capital Controls: Country Experiences with Their Use and Liberalization, by Akira Ariyoshi, Karl Habermeier, Bernard Laurens, Inci Ötker-Robe, Jorge Iván Canales Kriljenko, and Andrei Kirtlenko. 2000.

    189. Current Account and External Sustainabitity in the Baltics, Russia, and Other Countries of the Former Soviet Union, by Donal McGettigan. 2000.

    188. Financial Sector Crisis and Restructuring: Lessons from Asia, by Carl-Johan Lindgren, Tomás J.T. Baliño, Charles Enoch, Anne-Marie Guide, Marc Quintyn, and Leslie Teo. 1999.

    187. Philippines: Toward Sustainable and Rapid Growth, Recent Developments and the Agenda Ahead, by Markus Rodlauer, Prakash Loungani, Vivek Arora, Charalambos Christofides, Enrique G. De la Piedra, Piyabha Kongsamut, Kristina Kostial, Victoria Summers, and Athanasios Vamvakidis. 2000.

    186. Anticipating Balance of Payments Crises: The Role of Early Warning Systems, by Andrew Berg, Eduardo Borensztein, Gian Maria Milesi-Ferretti, and Catherine Pattillo. 1999.

    185. Oman Beyond the Oil Horizon: Policies Toward Sustainable Growth, edited by Ahsan Mansur and Volker Treichel. 1999.

    184. Growth Experience in Transition Countries, 1990–98, by Oleh Havrylyshyn, Thomas Wolf, Julian Beren-gaut, Marta Castello-Branco, Ron van Rooden, and Valerie Mercer-Black man. 1999.

    183. Economic Reforms in Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan, by Emine Gürgen, Harry Snoek, Jon Craig, Jimmy McHugh. Ivailo Izvorski, and Ron van Rooden. 1999.

    182. Tax Reform in the Baltics, Russia, and Other Countries of the Former Soviet Union, by a staff team led by Liam Ebrill and Oleh Havrylyshyn. 1999.

    181. The Netherlands: Transforming a Market Economy, by C. Maxwell Watson, Bas B. Bakker. Jan Kees Martijn, and loannis Halikias. 1999.

    180. Revenue Implications of Trade Liberalization, by Liam Ebrill, Janet Stotsky, and Reint Gropp. 1999.

    179. Disinflation in Transition: 1993–97, by Carlo Cottarelli and Peter Doyle. 1999.

    178. IMF-Supported Programs in Indonesia, Korea, and Thailand: A Preliminary Assessment, by Timothy Lane, Atish Ghosh, Javier Hamann, Steven Phillips, Marianne Schulze-Ghattas, and Tsidi Tsikata. 1999.

    177. Perspectives on Regional Unemployment in Europe, by Paolo Mauro, Eswar Prasad, and Antonio Spilim-bergo. 1999.

    176. Back to the Future: Postwar Reconstruction and Stabilization in Lebanon, edited by Sena Eken and Thomas Helbling. 1999.

    175. Macroeconomic Developments in the Baltics, Russia, and Other Countries of the Former Soviet Union, 1992–97, by Luis M. Valdivieso. 1998.

    174. Impact of EMU on Selected Non-European Union Countries, by R. Feldman, K. Nashashibi, R. Nord, P. Allum, D. Desruelle, K. Enders, R. Kahn, and H. Temprano-Arroyo. 1998.

    173. The Baltic Countries: From Economic Stabilization to EU Accession, by Julian Berengaut, Augusto Lopez-Claros, Françhise Le Gall, Dennis Jones, Richard Stern, Ann-Margret Westin, Effie Psalida, Pietro Garibaldi. 1998.

    172. Capital Account Liberalization: Theoretical and Practical Aspects, by a staff team led by Barry Eichen-green and Michael Mussa, with Giovanni Dell’Ariccia, Enrica Detragiache, Gian Maria Milesi-Ferretti, and Andrew Tweedie. 1998.

    171. Monetary Policy in Dollarized Economies, by Tomás Balifio, Adam Bennett, and Eduardo Borensztein. 1998.

    170. The West African Economic and Monetary Union: Recent Developments and Policy Issues, by a staff team led by Ernesto Hernàndez-Catà and comprising Christian A. François, Paul Masson, Pascal Bou-vier. Patrick Peroz, Dominique Desruelle. and Athanasios Vamvakidis, 1998.

    169. Financial Sector Development in Sub-Saharan African Countries, by Hassanali Mehran, Piero Ugolini, Jean Phillipe Briffaux, George Iden, Tonny Lybek, Stephen Swaray, and Peter Hayward. 1998.

    168. Exit Strategies: Policy Options for Countries Seeking Greater Exchange Rate Flexibility, by a staff team led by Barry Eichengreen and Paul Masson with Hugh Bredenkamp, Barry Johnston, Javier Hamann, Esteban Jadresic, and Inci Ötker. 1998.

    167. Exchange Rate Assessment: Extensions of the Macroeconomic Balance Approach, edited by Peter Isard and Hamid Faruqee. 1998.

    Note: For information on the titles and availability of Occasional Papers not listed, please consult the IMF’s Publications Catalog or contact IMF Publication Services.

    As noted in Section I, monetary policy or other motives may also have played sonic pan in motivating capital controls—even where the exchange rate appeared to be the most important factor.

    Nonresident free yen accounts were introduced in July 1960. Nonresidents could deposit yen balances (received from current account transactions or the sale of foreign exchange) into these accounts. Although yen balances; in these accounts could be freely converted back to foreign currencies, other yen balances could not be converted into foreign exchange.

    See for example Fukao (1990) and Argy (1987) and the references therein.

    In 1971, the floating of the deutsche mark and the suspension of the convertibility of the U.S. dollar into gold led to an expectation of a yen revaluation. Large capital inflows occurred, and Japan’s official reserves increased from US$4.4 billion to US$7.9 billion in the first seven months of 1971, In August alone, just before the floating of the yen, capital inflows of US$4 billion were recorded through channels such as advance payments for exports.

    In the devises-titres market, proceeds from sales of foreign securities by residents were sold in an unregulated exchange market to other residents to enable them to acquire foreign securities.

    Restrictions included the establishment of a 100 percent marginal reserve requirement on incremental French franc deposits of nonresidents. At the same time, controls on capital outflows were maintained, partly because there was a simultaneous tendency for the French franc to depreciate against the deutsche mark.

    In April 1972, after the demise of the Bretton Woods system, the snake was established as a multilateral European exchange arrangement—with bilateral fixed, but adjustable fluctuation margins—aimed at stabilizing intra-European exchange rates.

    The tightening of controls on capital outflows (in March 1974) was combined with the abolition of the dual exchange market, which, on the whole, had been considered rather ineffective.

    In 1984, expiration dates were set for the remaining recourse to safeguard clauses for France (two years), which had been invoked since the 1968 civil unrest, and for Italy and Ireland (three years).

    The Single Act fell short of enacting the complete liberalization of capital movements. However, it stipulated that further obligations concerning the freedom for capital movements could be taken by qualified majority and that unanimity would be required for measures that would constitute a step backward. This greatly facilitated the adoption of secondary legislation with respect to the liberalization of capital movements.

    The Maastricht Treaty establishing the EMU was not approved in a referendum in June 1992 in Denmark.

    Spain introduced non-interest-bearing cash reserves for incremental peseta lending to nonresidents. Portugal intensified the enforcement of existing regulations.

    See, for instance, Eichengreen and Wyplosz (1993). (The Tobin tax, proposed by economist James Tobin of Yale University, would be a tax on transactions in foreign exchange markets.)

    Following balance of payments problems in Canada in early 1968, all Canadian transactions were exempted from restrictions under U.S. balance of payments programs. In contrast, the Japanese balance of payments position improved and the exemption for long-term investment in Japan was ended in 1969.

    The Board of Governors of the Federal Reserve System was given the authority to impose regulations (and make the program mandatory) in 1968. However, the Board chose to continue with the voluntary nature of the scheme, given the widespread cooperation from financial institutions.

    An additional ceiling to finance U.S. exports was introduced at the end of 1969 to ensure that the program did not hinder exports. A more significant easing in the program took place in November 1971 when all foreign credit to finance imports was exempted from the program.

    Although the growth of the Eurodollar market was partly at the expense of U.S.based financial markets, U.S. banks were very active in this market and reported significant earnings from their international activities.

    A minimum reserve requirement on the growth of external liabilities, which had applied from December 1968 until October 1969, had been reintroduced in April 1970.

    A key objective of industrial policy was to prevent the takeover of innovative Japanese companies by foreign competitors. See Ito (1992) and Argy and Stein (1997) for a more detailed discussion of Japanese industrial policy.

    The Gensaki market was a market for repurchase agreements in which nonfinancial institutions were able to participate. Nonresidents sere allowed to access the market from 1979 onward.

    The real demand principle was eventually abolished in April 1984.

    Frankel (1984) provides a summary of the events leading up to the establishment of the working group, including a discussion of a possible misalignment in bilateral exchange rates. He argues that although the stated purpose of the agreement was to bring about a yen appreciation, the changes agreed to were, in practice, more likely to put (temporary) downward pressure on the value of the yen.

    Segmentation rules for offshore activities were also less strict than those applied domestically.

    This position was reversed in the early 1990s, when Japanese banks reduced their Euromarket operations.

    Bond issues by Japanese corporations (both foreign and domestic) rose from ¥1.7 trillion in the year ending March 1980 to ¥6.8 trillion in the year ending March 1985, and to ¥21.8 trillion in the year ending March 1989. Offshore issues rose from around 40 percent of total issues in 1980 to around 60 percent in 1989.

    Issuing costs were also generally lower offshore (see Takeda and Turner, 1992).

    Fukao (1990) notes that institutions did not invest offshore to the maximum extent permitted, suggesting that the new limits sere not binding.

    Ito (1992) illustrates this on the basis of covered interest parity calculations. In contrast, prior to 1980, capital controls appear to have been at least partially effective in insulating Japanese financial markets. Fukao (1990) argues that controls tended to be effective when initially introduced, but that their effectiveness gradually eroded.

    An indication of the extent of the overseas expansion of financial institutions is provided by foreign direct investment data. Osugi (1990) documents that foreign direct investment by banking and insurance companies exceeded that by manufacturing companies between 1985 and 1987.

    The debt level of nonfinancial corporations increased from 101 percent of GDP in 1985 to 135 percent in 1990. For the household sector, debt as a share of disposable income rose from 68 percent to 96 percent in the same period.

    The ratio of financial assets to liabilities for the manufacturing sector rose from about 0.6 at the beginning of the 1980s to more than 1 in 1988.

    Banks had traditionally operated with interest rate spreads that were largely fixed, and therefore profitability was determined mainly by market share. Deregulation placed downward pressure on interest rate margins while also leading to greater competition between lenders for market share Kanaya and Woo (2000) note that banks reduced credit standards during the asset price boom in their attempts to continue lending.

    Government involvement in the economy was extensive. This nationalization process added companies accounting for around 15 percent of industrial activity and raised government control of the banking sector to 85-90 percent (Barker, Britton, and Major, 1984).

    In contrast, the policy objective of the French authorities of ensuring that strategic firms benefit from adequate financial conditions had attracted additional foreign capital inflows.

    Grilli and Roubini argue, in an article included in Conti and Hamaui (1993), that the removal of capital controls in Europe may have reduced asymmetric intra-EMS exchange rate responses to movements in the U.S. dollar rate by increasing asset substitutability.

    These exemptions included foreign direct investment. When, in the mid-1970s, serious balance of payments problems arose, further delays were granted. France had been granted a derogation from the liberalization directive since 1968 under the safeguard clause.

    Alternatively, exemptions for foreign direct investment were granted if the proposal could be expected to be beneficial for the balance of payments. In order to secure such benefit, a substantial part of the profits earned abroad had to be repatriated. In order to enforce compliance, a large administrative apparatus was needed to separate cross-border current account transactions from investment transactions.

    In mid-1979, official foreign reserves were US$22 billion (equivalent to almost six months of imports) and exceeded the outstanding stock of short-term and medium-term official debt, which was US$15.5 billion.

    Apart from ceilings on foreign travel allowances and similar restrictions, the main capital controls remaining in mid-1979 were the obligation to finance foreign direct investment abroad in excess of £5 million in foreign currency, the prohibition of sterling bank financing of trade between third countries, and the obligation to execute cross-border portfolio transactions through the investment currency market. In 1979, a window of opportunity arose to abolish the investment currency market, because the effective premium for U.S. dollar purchases had fallen from 50 percent at the beginning of the year to 6 percent by midyear. At such relatively low premium levels, the windfall capita losses in pounds sterling for portfolio holdings were quite limited.

    See Artis and Taylor (1989), p. 172, who summarize earlier studies on this issue.

    See, for example, Evans and others (1996) and the various contributions in Silverstone and others (1996).

    Carey and Duggan (1986) briefly document the history and abolition of exchange controls.

    At the same time, the exchange rate was fixed against a basket of currencies, replacing an earlier “crawling-peg” system that resulted in frequent small devaluations based on inflation differentials between New Zealand and its major trading partners.

    Official borrowings in the month prior to the election (mainly to support the exchange rate) totaled US$1.2 billion (3.5 percent of GDP). See the discussion in Reserve Bank of New Zealand (1985).

    Limits on the spot currency holdings of foreign exchange dealers were relaxed and then abolished at the end of the year (aside from prudential requirements). Rules limiting private offshore borrowing were abolished in October 1984. From November 1984. New Zealand financial institutions were permitted to borrow funds offshore, while foreign-owned companies operating in New Zealand were able to raise funds on domestic capital markets.

    There has been no intervention in foreign exchange markets since the New Zealand dollar was floated.

    Direct investment inflows rose from US$175 million in 1983 to US$1.3 billion in 1985, During the same period, the increase in direct investment outflows was less dramatic, rising from US$75 million to US$309 million. The privatization of government businesses is likely to have influenced inflows from the late 1980s. The New Zealand dollar appreciated by almost 50 percent against the U.S. dollar between the beginning of 1985 and the second quarter of 1988. more than offsetting the 20 percent depreciation of mid-1984.

    The introduction of, and subsequent increase in, a goods and services tax also influenced the inflation rate in 1986 and 1989. respectively.

    Private sector debt increased from 11.4 percent of GDP in March 1984 to about 14 percent by March 1987.

    In Norway and Finland, these crises were also linked to falling oil prices and to the collapse of trade with the former Soviet Union. See Drees and Pazarbaşioģlu (1998) for further discussion.

    Strengthening prudential supervision was seen by some at the time as running counter to the ideology underpinning deregulation and liberalization (see Thomson, 1991). Market participants may also be overconfident of their ability to respond to the new environment. For example, in arguing for financial sector reform. Jonung (1986) claims that “a bank collapse was out of the question” (p.116) in Sweden and considers that there was a tendency to underestimate the market’s ability to self-regulate. In fact, a lightening in prudential standards was required following financial sector reform.

    The fact that liberalization often followed changes of government (with associated changes in economic philosophy) in both the United Kingdom and New Zealand suggests that political factors also influence the decision on whether or not to liberalize.

    See Demirgüç-Kunt and Detragiache (1998) for an investigation of the links between financial sector reform and financial crisis. They conclude that the institutional environment has an important influence on the risk of a crisis.

      You are not logged in and do not have access to this content. Please login or, to subscribe to IMF eLibrary, please click here

      Other Resources Citing This Publication