- Age Bakker, and Bryan Chapple
- Published Date:
- September 2002
© 2002 International Monetary Fund
Production: IMF Graphics Section
Typesetting: Alicia Etchebarne-Bourdin
Figures: Joseph A. Kumar
[Advanced country experiences with capital account liberalization/by Age
Bakker and Bryan Chapple]—[Washington, D.C.: International Monetary Fund, 2002]
p. cm.—(Occasional paper); 214
1. Capital movements. I. Chapple, Bryan. II. International Monetary Fund.
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- I Overview
- II Capital Controls and Exchange Rate Policy
- III Capital Controls and Monetary Policy
- IV Experiences with Gradual Liberalization
- V Rapid Liberalization
- VI Summary and General Lessons
- 2.1. Japan: Foreign Exchange Reserves and Nominal Exchange Rate, 1970–79
- 2.2. Japan: Portfolio Flows, 1970–80
- 2.3. France: Interest Rates, 1971–79
- 2.4. France: Nominal Exchange Rates, 1970–79
- 2.5. Europe: Inflation Differentials vis-à-vis Germany. 1980–95
- 3.1. Federal Republic of Germany: Interest Rate Differentials, 1960–74
- 4.1. Japan: Foreign Direct Investment, 1970–98
- 4.2. Japan: Portfolio Flows, 1975—99
- 4.3. Japan: External Position of Banks and Nominal Exchange Rate, 1980–2000
- 4.4. France: Interest and Exchange Rates, 1980–95
- 4.5. France: Portfolio Flows, 1975–95
- 5.1. United Kingdom: Interest Rates, 1970–80
- 5.2. New Zealand: Inflation, Credit Growth, and Interest Rate, 1980–95
The following symbols have been used throughout this paper:
… to indicate that data are not available;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
– between years or months (e.g., 1998–99 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 1998/99) to indicate a fiscal (financial) year.
“n.a.” means not applicable.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
The painful experience of the Asian crisis in the late 1990s demonstrated how important it is for developing and transition countries to ensure that liberalization of capital account transactions proceeds in tandem with institutional reform and the development of sufficient regulatory and supervisory capacity. Doing this helps ensure that capital markets are both stable and efficient, so that countries derive the maximum benefit from opening themselves up to international financial flows and the risk of future international economic and financial crises can be minimized.
The IMF has therefore sought to increase its knowledge about how capital markets in developing and transition countries might best be liberalized. One aspect of this effort was to review how advanced (industrial) countries had gradually opened up their capital accounts over the several decades following World War II. As part of this effort, the IMF’s Monetary and Exchange Affairs Department arranged for two authorities on this topic, Age Bakker and Bryan Chapple of De Nederlandsche Bank, to come to IMF headquarters in Washington to present a paper to Executive Directors and staff members in December 2001. The success of this undertaking convinced us that their paper should be made available to a wider audience, and, with the cooperation of the External Relations Department, it is now being published in the IMF’s Occasional Paper series.
I hope that readers will find this paper informative and that its publication will assist both policymakers in making choices about liberalizing their countries’ capital accounts and scholars in better understanding an important chapter of economic history.
Stefan N. M. Ingves
IMF Monetary and Exchange Affairs Department
This study was prepared by Age Bakker and Bryan Chapple—who are, respectively, Deputy Executive Director and Senior Economist in the Monetary and Economic Policy Department of De Nederlandsche Bank—for the Monetary and Exchange Affairs Department of the International Monetary Fund. To a considerable extent, it draws on earlier work by the first author (Bakker, 1996), expanded to include the liberalization experiences of non-European advanced economies. In addition, the study considers the extent to which the lessons learned by advanced economies in recent decades continue to apply in the current environment. The paper was presented at a workshop for Executive Board and staff members of the IMF at its Washington headquarters on December 4, 2001.
The authors are grateful to Stefan Ingves, Tomás Baliño, Shogo Ishii, and Karl Habermeier of the Monetary and Exchange Affairs Department for helpful discussions and comments as the paper evolved. Many colleagues commented on the experiences of their countries and provided data, including Lars Fors, Sveriges Riksbank; Kai Aaen Hansen, Danmarks Nationalbank; Masayuki Matsushima, Hidehiko Sogano, and Junko Matsumi, Bank of Japan; Takatoshi Ito, formerly with Japan’s Ministry of Finance; Mitsuhiro Fukao, Keio University; Peter Mooslechner, Oesterreichische Nationalbank; Geoff Mortlock of the Reserve Bank of New Zealand; Thomas Simpson of the U.S. Board of Governors of the Federal Reserve System and Edwin Truman, then of the U.S. Treasury Department; Hervé Hannoun and Marc-Olivier Strauss-Kahn, Banque de France; Pierre van der Haegen and Lucas ter Braak, European Central Bank; and Mathias Zurlinden, Swiss National Bank.
At De Nederlandsche Bank, Rolf Pauli, Martin Admiraal, and Frans Vermeer provided expert research assistance. Ingrid van de Mortel provided excellent secretarial support. At the IMF, Matthew Fleming and Harald Anderson provided excellent research assistance; Nadia Malikyar and Joanna Meza-Cuadra provided outstanding secretarial support; and Paul Gleason edited the manuscript and coordinated production of the publication.
The study has also greatly benefited from the comments by other IMF staff and from members of the IMF’s Executive Board, but the views expressed are those of the authors and do not necessarily reflect the views of the IMF or De Nederlandsche Bank.