A New Set of Measures on Capital Account Restrictions

Jacques A Miniane

doi:10.5089/9781589063235.024.A004

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A New Set of Measures on Capital Account Restrictions

Author: Mr. Jacques A Miniane

Publication Date:: 29 Jul 2004

eISBN:: 9781589063235

ISBN:: 9781589063235

Language:: English

Keywords:: SP; foreign currency; control program; IMF dummy; EC resident; capital control indices; Capital flows; Capital account; Capital controls; Foreign direct investment; Securities; Global; Africa

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This paper extends the IMF’s post-1996 disaggregated capital account indices back to 1983 for a representative sample of 34 countries. All the information used to construct the indices comes from IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions and is widely available. It is shown that the disaggregated indices do a better job than the pre-1996 single dummy in reflecting both global trends toward capital account liberalization and country-specific liberalization episodes that occurred during the period. Given the frequency of IMF reporting procedures, the disaggregated indices still fail to accurately track temporary control programs designed to fight off crises. Moreover, the lack of systematic information on enforcement means that the indices remain de jure. Some tentative solutions to these limitations are suggested. [JEL C82, F02, F33]

Abstract

A New Set of Measures on Capital Account Restrictions

JACQUES MINIANE^*

The Asian crisis of late 1997 and the subsequent collapses in Russia, Brazil, and Argentina have sparked a vigorous debate about how best to improve the current global financial architecture. In this context, recent papers by De Gregorio, Edwards, and Valdés (2000), Edison and Reinhart (2001), and Miniane and Rogers (2003) have tried to assess the effectiveness of capital controls in shaping the size and maturity of capital flows.

One fundamental limitation in the capital controls literature has been the lack of a reliable measure of capital account openness. Capital controls can take many different forms, making it time-consuming to track all changes in restrictions within a single country. Moreover, the construction of any capital controls index raises the problem of aggregation. By how much should a measure drop if a country relaxes one of its many restrictions? Last but not least, the effectiveness of capital controls depends crucially on the government’s willingness and ability to enforce them. Assuming one has qualitative evidence on enforceability, how should it be weighted in the index?

As a result of the lack of a reliable index of capital controls, many studies trying to assess the ability of capital controls to affect financial flows have followed a case-study approach.¹ Papers that have attempted to study the effects of capital controls cross-sectionally, such as Grilli and Milesi-Ferretti (1995), have commonly relied on the 0/1 IMF dummies. The pre-1996 editions of IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER) provide dummies for all member countries in six separate categories: bilateral payments arrangements with members and nonmembers, restrictions on payments for current account transactions, restrictions on payments for capital account transactions, import surcharges, advance import deposits, and surrender or repatriation requirements for export proceeds. Besides the obvious limitations of a dichotomic dummy, Eichengreen (2001) has pointed out that the dummy for capital account transactions accounts only for restrictions on residents, not on nonresidents.

To remedy the lack of suitable capital control measures, the IMF changed reporting procedures starting with the 1996 edition of the AREAER.² For each of the above mentioned categories, the “new” AREAER provides dummies in not one but several different subcategories of transactions. In the case of capital account transactions, there are 13 such subcategories, some of which are in turn further disaggregated.³ Moreover, a distinction is now made between controls on inflows and outflows.

The new reporting procedures have prompted several authors, some within the IMF’s staff, to build capital control indices based on the disaggregated AREAER classification (Table 1).⁴ Barry Johnston and Natalia Tamirisa are rightly credited with initiating this trend (Johnston and Tamirisa, 1998; Tamirisa, 1999 and 2003). The authors build indices for 45 countries by averaging over all possible 0/1 dummies in the new AREAER. Theirs may be the most disaggregated de jure measure yet, but it is limited by the fact that it covers only the post-1996 period.⁵ Rossi (1999) tries to extend period coverage for a small sample of 15 countries. He builds Johnston and Tamirisa-style indices for 1997 as well as a “subjective” index for 1989. Values for intermediate years are approximated by a linear interpolation if the country experienced a gradual change in restrictions between the endpoints, or by a one-time change otherwise. Brune and others (2001) can only be praised for the coverage of their measure: 173 countries for the period 1973–1999. The index is a sum of 0/1 dummies over 5 different categories, which are in turn an aggregation of the 13 subcategories in the new AREAER.⁶ Four of the five categories separate controls on inflows and outflows. The main drawback of Brune and others’ data is that they are not publicly available. Also, early editions of the AREAER often lack information to code all five categories, let alone inflows and outflows separately.⁷ It remains an open question how the authors tackled this problem.

Table 1.

Summary of Alternative Capital Control Measures

Table 1.

Summary of Alternative Capital Control Measures

		Information
	Name	Source	Coverage	Coding	Advantages	Disadvantages
Based on AREAER information	IMF dummy	AREAER	All IMF member countries, 1967–1995.	0/1 dummy depending on whether country has controls on outflows.	Extensive coverage.	- Accounts only for controls on outflows. - Single dummy is too limited.
	Johnston and Tamirisa (1998)	AREAER	45 countries for the year 1996.	Average of all possible 0/1 dummies in the new AREAER.	- Discriminates between controls, on inflows, and outflows. - Most disaggregated among AREAER indices.	Coverage restricted to post-1996 period.
	Rossi (1999)	AREAER, others nonspecified.	15 countries, 1989–1997.	For 1997, average of 0/1 dummies over all disaggregated categories of transactions. For 1989, three possible values depending on whether 1997 value is high, intermediate, or low. In between, linear interpolation if country had gradual change, or one-time change otherwise.	Discriminates between controls on inflows and outflows.	- 1989 index can take only three values. - 1989 index depends on 1997 index. - Values in between 1989 and 1997 are computed through linear interpolation or one-time change. - Limited coverage.
	Brune and others (2001)	AREAER	173 countries, 1973–1999.	Sum of all 0/1 dummies over five disaggregated categories, four of which separate controls on inflows and outflows.	- Extensive coverage. - Discriminates between controls on inflows and outflows.	- Not publicly available. - Only five categories of transactions. - Pervasive lack of information in the AREAER?
	Quinn (1997)	AXEAER	63 countries, 4 years publicly available: 1958, 1973, 1982, and 1988.	For capital account receipts and payments, assigns a value between 0 and 2 in increments of 0.5 depending on severity of the restrictions.	- Takes into account the severity of restrictions. - Discriminates between inflows and outflows.	- Limited public availability. - Limited disaggregation. - Aggregation over different degrees of severity is problematic.
	Miniane (2004)	AREAER	34 countries. 1983–2000.	Average of all possible 0/1 dummies over 13 categories of capital account transactions.	- Substantial disaggregation. - Indicates systematically when coding is done by induction rather than through explicit information.	- Limited country coverage. - No distinction between controls on inflows and outflows.
De facto measures	Edison and Warnock (2003)	Standard and Poor’s/IFC.	29 emerging economies, 1988-present.	Computes the share of domestic equities (measured in market capitalization) that are open for foreign purchase.	- Monthly measure. - Metric is very appropriate.	- Restrictions on domestic equity purchases by foreigners are a limited subset of all possible restrictions.
	Lane and Milesi-Ferretti (2001)	Authors’ own calculations.	67 countries, 1970–1998.	Computes portfolio and direct investment assets and liabilities as a share of GDP.	- Measure is direct mapping of the common trade openness measure.	- Changes in asset prices can lead to changes in the measure with no corresponding change in positions and/or in de jure restrictions. - Low values in the index may be because of factors other than capital account closeness.

Table 1.

Summary of Alternative Capital Control Measures

		Information
	Name	Source	Coverage	Coding	Advantages	Disadvantages
Based on AREAER information	IMF dummy	AREAER	All IMF member countries, 1967–1995.	0/1 dummy depending on whether country has controls on outflows.	Extensive coverage.	- Accounts only for controls on outflows. - Single dummy is too limited.
	Johnston and Tamirisa (1998)	AREAER	45 countries for the year 1996.	Average of all possible 0/1 dummies in the new AREAER.	- Discriminates between controls, on inflows, and outflows. - Most disaggregated among AREAER indices.	Coverage restricted to post-1996 period.
	Rossi (1999)	AREAER, others nonspecified.	15 countries, 1989–1997.	For 1997, average of 0/1 dummies over all disaggregated categories of transactions. For 1989, three possible values depending on whether 1997 value is high, intermediate, or low. In between, linear interpolation if country had gradual change, or one-time change otherwise.	Discriminates between controls on inflows and outflows.	- 1989 index can take only three values. - 1989 index depends on 1997 index. - Values in between 1989 and 1997 are computed through linear interpolation or one-time change. - Limited coverage.
	Brune and others (2001)	AREAER	173 countries, 1973–1999.	Sum of all 0/1 dummies over five disaggregated categories, four of which separate controls on inflows and outflows.	- Extensive coverage. - Discriminates between controls on inflows and outflows.	- Not publicly available. - Only five categories of transactions. - Pervasive lack of information in the AREAER?
	Quinn (1997)	AXEAER	63 countries, 4 years publicly available: 1958, 1973, 1982, and 1988.	For capital account receipts and payments, assigns a value between 0 and 2 in increments of 0.5 depending on severity of the restrictions.	- Takes into account the severity of restrictions. - Discriminates between inflows and outflows.	- Limited public availability. - Limited disaggregation. - Aggregation over different degrees of severity is problematic.
	Miniane (2004)	AREAER	34 countries. 1983–2000.	Average of all possible 0/1 dummies over 13 categories of capital account transactions.	- Substantial disaggregation. - Indicates systematically when coding is done by induction rather than through explicit information.	- Limited country coverage. - No distinction between controls on inflows and outflows.
De facto measures	Edison and Warnock (2003)	Standard and Poor’s/IFC.	29 emerging economies, 1988-present.	Computes the share of domestic equities (measured in market capitalization) that are open for foreign purchase.	- Monthly measure. - Metric is very appropriate.	- Restrictions on domestic equity purchases by foreigners are a limited subset of all possible restrictions.
	Lane and Milesi-Ferretti (2001)	Authors’ own calculations.	67 countries, 1970–1998.	Computes portfolio and direct investment assets and liabilities as a share of GDP.	- Measure is direct mapping of the common trade openness measure.	- Changes in asset prices can lead to changes in the measure with no corresponding change in positions and/or in de jure restrictions. - Low values in the index may be because of factors other than capital account closeness.

Parallel to these de jure, AREAER-based efforts, researchers have been constructing de facto indices of capital account openness.⁸ Edison and Warnock (2003) compute the ratio of total market capitalization of equities that are available for purchase by foreign investors over total market capitalization.⁹ While their index has the great advantage of being both monthly and readily interpretable, restrictions on capital inflows for equity purchases are a small subset of possible capital controls. Another de facto index is based on the work of Lane and Milesi-Ferretti (2001) on countries’ net external wealth and consists of the ratio of a country’s portfolio and direct investment assets and liabilities over GDP. This is, in a sense, a capital account counterpart to the trade openness measures commonly used in the literature.

This paper builds on the tradition of disaggregated AREAER-based measures initiated by Johnston and Tamirisa. Specifically, I use text information in the AREAER to extend this methodology back to 1983 for a sample of 34 countries, thus extending period coverage significantly. As will be shown in the paper, the disaggregated indices do a better job than the standard pre-1996 dummy at tracking both global trends towards capital account liberalization as well as country-specific liberalization episodes. Unlike the Johnston and Tamirisa data, my indices do not disaggregate beyond the 13 main subcategories of capital account transactions in the post-1996 classification. Moreover, they do not separate between controls of inflows and outflows despite a priori advantages of doing so, since it is questionable whether the pre-1996 editions of the AREAER contain enough text information for such a disaggregation. The indices are very transparent in this regard, as I have systematically indicated when the coding of a dummy was done through explicit information in the text and when it was the result of logical induction as explained further in the paper. To see why this is relevant information, note that a full 25 percent of the dummies for the early 1980s were coded through logical induction because of a lack of explicit indications.

The paper is organized as follows. Section I presents and justifies the choice of sample countries and explains in detail the sources of information and the methodology used in the construction of the indices. Section II compares the index with the pre-1996 IMF single dummy, as well as with the de facto measure by Lane and Milesi-Ferretti (LMF).¹⁰ Section III addresses the limitations of the post-1996 methodology. In particular, the indices miss temporary capital control programs designed to fight off external crises, and their purely de jure nature says nothing about countries’ enforcement of controls. Some possible solutions are suggested. Section IV contains concluding remarks.

I. Sample and Methodology

Countries and Period Covered

The choice of countries in the data set is somewhat arbitrary. The original impulse behind this project was to improve on the existing IMF single dummies to better study whether capital controls insulate countries from foreign monetary shocks (see Miniane and Rogers, 2003). Country selection for the indices was thus restricted by the availability of data necessary to pursue Miniane and Rogers’s research. The list of countries includes Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Denmark, Ecuador, Finland, France, Germany, Greece, Hong Kong, India, Italy, Japan, Korea, Luxembourg (pooled with Belgium before 1996), Malaysia, Mexico, the Netherlands, Norway, the Philippines, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. The data are annual and cover the period 1983 to 2000.¹¹

Despite the arbitrariness of the list, it is worth noting that the sample is diverse along several lines. The five main continents are represented, with particular emphasis on Europe, Asia, and the Americas. Countries range from poor (India, Ecuador) to very rich (Germany, Japan, etc.), with intermediate cases like Chile or Mexico. The whole spectrum of exchange rate arrangements is covered, from a full-blown currency board in Hong Kong, to a managed float in countries like Chile, to a free float in several OECD countries. It is hoped that this diversity somewhat compensates for the relative shortness of the list.¹²

Information Sources

There are many sources of information on capital controls, including country bulletins on laws enacted. A notable source is the AREAER, which not only contains the previously mentioned dummies but also contains very detailed reports on each country’s exchange arrangement, administration of control, prescription of currency, regulations on import and import payments, payments for invisibles, exports and export proceeds, proceeds from invisibles, capital account transactions, and gold. For each country there is also a section called “Changes,” where the date and details of any change in regulations in any of these categories is registered. As we shall see, the “Changes” section played a crucial role for the construction of my data.

I have decided to use the AREAER as the sole source of information. The reasons for this decision are twofold. First, the AREAER is the only publication that records and classifies the information in a systematic way, both throughout the years and, more importantly, throughout the countries. The same cannot be said about local publications, and this becomes an important consideration when constructing an index. Second, the AREAER is easy to access to verify the indices or their extension to a wider sample of countries or years.

Methodology

The “new” AREAER introduced in 1996 subdivides capital account transactions into 13 subcategories, to which I added a fourteenth as explained below:

Capital market securities: shares or other securities of a participating nature, and bonds and other securities with an original maturity of more than one year.
Money market instruments: securities with an original maturity of one year or less, such as certificates of deposit, Treasury bills, and so forth.
Collective investment securities: share certificates or any evidence of investor interest in an institution for collective investment, such as mutual funds.
Derivatives and other instruments: refers to operations in other negotiable instruments and nonsecuritized claims not covered under the previous three items.
Commercial credits: covers operations directly linked to international trade transactions.
Financial credits: credits other than commercial credits.
Guarantees, sureties, and financial backup facilities: securities pledged for payment of a contract, such as warrants, letters of credit, and so on.
Direct investment.
Repatriation of profits or liquidation of direct investment.
Real estate transactions.
Personal capital movements: not considered in this paper because of a lack of consistent information in past editions of the AREAER.
Provisions specific to commercial banks and other credit institutions: regulations that are specific to these institutions, such as monetary and prudential controls.
Provisions specific to institutional investors: one common example is a limit on the share of the institution’s portfolio that may be held in foreign assets.
Multiple exchange rate arrangements. These are not part of the capital account subdivision of the AREAER, but I felt it was an important form of capital control. The AREAER systematically provides information on multiple exchange rate regimes.

The rules to construct dummies in each category are as follows:

The starting point is the disaggregated dummies provided by the 1996 to 2001 editions of the AREAER. Note that these dummies correspond to the period 1995 to 2000, since each edition reports on restrictions existing as of December 31 of the previous year.
Using text information in the 1995 edition, I fill as many of the 13 subcategories as possible for the year 1994. The rule is always the following: one if at least one restriction for that item, zero otherwise.
The next step is the “Changes” sections of both the 1995 and 1996 editions. For instance, the text in the 1995 edition might not mention anything about subcategory X in 1994, but the “Changes” section in the 1996 edition might refer to the elimination of some restriction in X during 1995. If one subcategory remains blank after completing this process, I assign it the same value it had in 1995. I call this rule “filling by default.”
In the rare case that a subcategory has an NA (not available) value for 1995, I keep the NA unless the text has some explicit information for 1994.
Once the 1994 indices have been completed, the process is repeated for 1993, 1992, …, back until 1983.

Other elements in the construction of the indices are worth mentioning. First, whereas the post-1996 editions clearly distinguish between controls on inflows and outflows, the text information in pre-1996 editions may not always contain information on both types of flows. My indices then account for restrictions on inflows and outflows without systematically discriminating between the two. This is in contrast with the pre-1996 IMF dummies, which, as noted earlier, are limited to restrictions on outflows. Second, some countries have restrictions on foreign equity participation in some sectors. The new AREAER will compute this as a double restriction in both capital market securities and in foreign direct investment (FDI). I believe this to be double counting and thus compute the measure as a single restriction on FDI. Since no approach is unambiguously correct, I indicate these sensitive cases with a note in the relevant cell on the spreadsheet. Third, many countries have restrictions on foreign investment in sectors related to defense and public order. Contrary to the AREAER, I chose not to consider these as capital controls. I again indicate these sensitive cases with a note.¹³

Finally, given that the AREAER fails to provide consistent information on whether countries enforce their restrictions, 1 attribute a value of 1 whenever a control exists, regardless of whether it is enforced. These are fully de jure measures. An exception happens whenever the AREAER indicates explicitly that a given restriction has never been used or enforced. In this case I consider it as nonexistent.¹⁴ Once again, I report these rare situations with a note in the relevant cell.

II. Comparison with Alternative Measures

Space considerations prevent a display of the 13 dummies for all countries and all years in the paper. An average over the 13 dummies for each country and each year is presented in Table 2. Tables 3 and 4 present the IMF single dummy and the LMF measure, respectively.¹⁵

Table 2.

Disaggregated Indices

Note: For a given country and year, the index represents the average over the 13 different dummies.Source: Author’s own data.

Table 2.

Disaggregated Indices

															Hong Kong
	Argentina	Australia	Austria	Belgium	Brazil	Canada	Chile	Colombia	Denmark	Ecuador	Finland	France	Germany	Greece	SAR	India
1983	0.917	0.5	0.692	0.615	1	0.231	1	1	0.692	0.846	0.923	0.692	0.231	0.923	0.077	0.917
1984	0.917	0.5	0.692	0.615	1	0.231	1	1	0.615	0.769	0.923	0.692	0.308	0.923	0.077	0.917
1985	0.917	0.5	0.692	0.615	1	0.231	1	1	0.615	0.846	0.923	0.692	0.231	0.923	0.077	0.917
1986	0.917	0.5	0.692	0.615	1	0.231	1	1	0.615	0.692	0.923	0.692	0.231	0.846	0.077	0.917
1987	0.750	0.5	0.692	0.615	1	0.231	1	1	0.615	0.692	0.923	0.692	0.231	0.846	0.077	0.917
1988	0.750	0.5	0.692	0.615	1	0.231	1	1	0.154	0.615	0.923	0.538	0.231	0.846	0.077	0.917
1989	0.667	0.5	0.538	0.615	1	0.231	1	1	0.154	0.615	0.846	0.385	0.231	0.846	0.077	0.917
1990	0.500	0.5	0.538	0.538	1	0.231	1	1	0.077	0.615	0.615	0.385	0.231	0.615	0.077	0.917
1991	0.500	0.5	0.308	0.538	1	0.231	1	1	0.077	0.538	0.308	0.385	0.231	0.615	0.077	0.917
1992	0.500	0.5	0.308	0.538	1	0.231	1	1	0.077	0.538	0.231	0.385	0.231	0.538	0.077	0.917
1993	0.417	0.5	0.308	0.538	1	0.231	1	1	0.077	0.538	0.231	0.385	0.231	0.462	0.077	0.917
1994	0.417	0.5	0.308	0.538	1	0.231	1	1	0.077	0.462	0.231	0.308	0.231	0.077	0.077	0.917
1995	0.417	0.5	0.308	0.538	1	0.077	1	1	0.077	0.462	0.231	0.308	0.231	0.077	0.077	0.917
1996	0.308	0.5	0.308	0.462	1	0.077	1	0.833	0.077	0.462	0.231	0.308	0.231	0.077	0.077	0.917
1997	0.385	0.5	0.308	0.462	0.923	0.077	1	0.833	0.077	0.462	0.231	0.308	0.308	0.077	0.077	0.923
1998	0.462	0.462	0.308	0.462	0.846	0.077	1	0.846	0.231	0.462	0.231	0.231	0.231	0.077	0.231	0.923
1999	0.462	0.462	0.308	0.154	0.846	0.154	0.923	0.846	0.231	0.462	0.231	0.231	0.077	0.077	0.231	0.923
2000	0.462	0.462	0.308	0.154	0.846	0.154	0.923	0.846	0.231	0.385	0.154	0.308	0.077	0.154	0.231	0.923
Average	0.592	0.494	0.462	0.513	0.970	9.188	0.991	0.956	0.265	0.581	0.517	0.440	0.222	0.500	0.103	0.918
1983–91	0.759	0.5	0.615	0.598	1	0.231	1.000	1.000	0.402	0.692	0.812	0.573	0.239	0.821	0.077	0.917
1992–00	0.425	0.487	0.308	0.427	0.940	0.145	0.983	0.912	0.128	0.470	0.222	0.308	0.205	0.179	0.128	0.920

	Italy	Japan	Korea	Luxemburg	Malaysia	Mexico	Netherlands	Norway	Philippines	Portugal	Singapore	S. Africa	Spain	Sweden	Switzerland	Turkey	U.K.	U.S.
1983	0.760	0.692	0.346	…	0.846	0.923	0.462	0.769	0.923	0.923	0.231	0.769	0.923	0.846	0.308	0.923	0.077	0.4615
1984	0.769	0.53S	0.846	…	0.846	0.923	0.462	0.692	0.923	0.923	0.231	0.769	0.923	0.769	0.308	0.923	0.077	0.3077
1985	0.769	0.538	0.346	…	0.846	0.923	0.462	0.692	0.923	0.923	0.231	0.846	0.923	0.769	0.308	0.923	0.077	0.3077
1986	0.769	0.538	0.846	…	0.846	0.923	0.077	0.692	0.923	0.538	0.231	0.846	0.846	0.846	0.231	0.923	0.077	0.3077
1987	0.769	0.538	0.846	…	0.846	0.923	0.077	0.692	0.923	0.538	0.231	0.846	0.846	0.769	0.231	0.923	0.077	0.3077
1988	0.462	0.462	0.846	…	0.846	0.923	0.077	0.692	0.923	0.538	0.231	0.846	0.846	0.769	0.231	0.923	0.077	0.3077
1989	0.462	0.462	0.846	…	0.846	0.923	0.077	0.231	0.923	0.615	0.231	0.923	0.833	0.462	0.231	0.846	0.077	0.2308
1990	0.231	0.462	0.846	…	0.846	0.923	0.077	0.331	0.923	0.538	0.231	0.923	0.833	0.462	0.231	0.615	0.077	0.2308
1991	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.923	0.462	0.231	0.923	0.750	0.462	0.231	0.615	0.077	0.2308
1992	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.846	0.308	0.231	0.923	0.250	0.308	0.231	0.615	0.077	0.2308
1993	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.846	0.308	0.231	0.923	0.250	0.308	0.231	0.615	0.077	0.2308
1994	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.846	0.308	0.231	0.846	0.250	0.308	0.231	0.615	0.077	0.2308
1995	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.917	0.308	0.231	0.846	0.250	0.308	0.154	0.615	0.077	0.2308
1996	0.231	0.385	0.846	0.077	0.845	0.833	0.077	0.231	0.846	0.231	0.231	0.846	0.308	0.308	0.154	0.750	0.077	0.2308
1997	0.231	0.385	0.846	0.077	0.845	0.833	0.077	0.231	0.846	0.231	0.308	0.846	0.308	0.308	0.154	0.750	0.077	0.2308
1998	0.231	0.231	0.769	0.077	0.846	0.833	0.077	0.231	0.846	0.231	0.385	0.846	0.308	0.308	0.154	0.750	0.077	0.2308
1999	0.231	0.154	0.769	0.077	0.846	0.833	0.077	0.23I	0.846	0.154	0385	0.846	0.231	0.308	0.154	0.750	0.077	0.2308
2000	0331	0.154	0.769	0.077	0.846	0.846	0.077	0.231	0.846	0.231	0.462	0.846	0.231	0.308	0.154	0.750	0.077	0.2308
Average	0.406	0.436	0.833	0.077	0.846	0.877	0.141	0.389	0.889	0.462	0.265	0.859	0.562	0.496	0.218	0.768	0.077	0.26
1983–91	0.581	0.521	0.846	…	0.846	0.915	0.205	0.547	0.923	0.667	0.231	0.855	0.858	0.684	0.256	0.846	0.077	0.2991
1991–00	0.231	0.350	0.821	0.077	0.846	0.840	0.077	0.231	0.854	0.256	0.299	0.863	0.265	0.308	0.179	0.690	0.077	0.2308

Note: For a given country and year, the index represents the average over the 13 different dummies.Source: Author’s own data.

Table 2.

Disaggregated Indices

															Hong Kong
	Argentina	Australia	Austria	Belgium	Brazil	Canada	Chile	Colombia	Denmark	Ecuador	Finland	France	Germany	Greece	SAR	India
1983	0.917	0.5	0.692	0.615	1	0.231	1	1	0.692	0.846	0.923	0.692	0.231	0.923	0.077	0.917
1984	0.917	0.5	0.692	0.615	1	0.231	1	1	0.615	0.769	0.923	0.692	0.308	0.923	0.077	0.917
1985	0.917	0.5	0.692	0.615	1	0.231	1	1	0.615	0.846	0.923	0.692	0.231	0.923	0.077	0.917
1986	0.917	0.5	0.692	0.615	1	0.231	1	1	0.615	0.692	0.923	0.692	0.231	0.846	0.077	0.917
1987	0.750	0.5	0.692	0.615	1	0.231	1	1	0.615	0.692	0.923	0.692	0.231	0.846	0.077	0.917
1988	0.750	0.5	0.692	0.615	1	0.231	1	1	0.154	0.615	0.923	0.538	0.231	0.846	0.077	0.917
1989	0.667	0.5	0.538	0.615	1	0.231	1	1	0.154	0.615	0.846	0.385	0.231	0.846	0.077	0.917
1990	0.500	0.5	0.538	0.538	1	0.231	1	1	0.077	0.615	0.615	0.385	0.231	0.615	0.077	0.917
1991	0.500	0.5	0.308	0.538	1	0.231	1	1	0.077	0.538	0.308	0.385	0.231	0.615	0.077	0.917
1992	0.500	0.5	0.308	0.538	1	0.231	1	1	0.077	0.538	0.231	0.385	0.231	0.538	0.077	0.917
1993	0.417	0.5	0.308	0.538	1	0.231	1	1	0.077	0.538	0.231	0.385	0.231	0.462	0.077	0.917
1994	0.417	0.5	0.308	0.538	1	0.231	1	1	0.077	0.462	0.231	0.308	0.231	0.077	0.077	0.917
1995	0.417	0.5	0.308	0.538	1	0.077	1	1	0.077	0.462	0.231	0.308	0.231	0.077	0.077	0.917
1996	0.308	0.5	0.308	0.462	1	0.077	1	0.833	0.077	0.462	0.231	0.308	0.231	0.077	0.077	0.917
1997	0.385	0.5	0.308	0.462	0.923	0.077	1	0.833	0.077	0.462	0.231	0.308	0.308	0.077	0.077	0.923
1998	0.462	0.462	0.308	0.462	0.846	0.077	1	0.846	0.231	0.462	0.231	0.231	0.231	0.077	0.231	0.923
1999	0.462	0.462	0.308	0.154	0.846	0.154	0.923	0.846	0.231	0.462	0.231	0.231	0.077	0.077	0.231	0.923
2000	0.462	0.462	0.308	0.154	0.846	0.154	0.923	0.846	0.231	0.385	0.154	0.308	0.077	0.154	0.231	0.923
Average	0.592	0.494	0.462	0.513	0.970	9.188	0.991	0.956	0.265	0.581	0.517	0.440	0.222	0.500	0.103	0.918
1983–91	0.759	0.5	0.615	0.598	1	0.231	1.000	1.000	0.402	0.692	0.812	0.573	0.239	0.821	0.077	0.917
1992–00	0.425	0.487	0.308	0.427	0.940	0.145	0.983	0.912	0.128	0.470	0.222	0.308	0.205	0.179	0.128	0.920

	Italy	Japan	Korea	Luxemburg	Malaysia	Mexico	Netherlands	Norway	Philippines	Portugal	Singapore	S. Africa	Spain	Sweden	Switzerland	Turkey	U.K.	U.S.
1983	0.760	0.692	0.346	…	0.846	0.923	0.462	0.769	0.923	0.923	0.231	0.769	0.923	0.846	0.308	0.923	0.077	0.4615
1984	0.769	0.53S	0.846	…	0.846	0.923	0.462	0.692	0.923	0.923	0.231	0.769	0.923	0.769	0.308	0.923	0.077	0.3077
1985	0.769	0.538	0.346	…	0.846	0.923	0.462	0.692	0.923	0.923	0.231	0.846	0.923	0.769	0.308	0.923	0.077	0.3077
1986	0.769	0.538	0.846	…	0.846	0.923	0.077	0.692	0.923	0.538	0.231	0.846	0.846	0.846	0.231	0.923	0.077	0.3077
1987	0.769	0.538	0.846	…	0.846	0.923	0.077	0.692	0.923	0.538	0.231	0.846	0.846	0.769	0.231	0.923	0.077	0.3077
1988	0.462	0.462	0.846	…	0.846	0.923	0.077	0.692	0.923	0.538	0.231	0.846	0.846	0.769	0.231	0.923	0.077	0.3077
1989	0.462	0.462	0.846	…	0.846	0.923	0.077	0.231	0.923	0.615	0.231	0.923	0.833	0.462	0.231	0.846	0.077	0.2308
1990	0.231	0.462	0.846	…	0.846	0.923	0.077	0.331	0.923	0.538	0.231	0.923	0.833	0.462	0.231	0.615	0.077	0.2308
1991	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.923	0.462	0.231	0.923	0.750	0.462	0.231	0.615	0.077	0.2308
1992	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.846	0.308	0.231	0.923	0.250	0.308	0.231	0.615	0.077	0.2308
1993	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.846	0.308	0.231	0.923	0.250	0.308	0.231	0.615	0.077	0.2308
1994	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.846	0.308	0.231	0.846	0.250	0.308	0.231	0.615	0.077	0.2308
1995	0.231	0.462	0.846	…	0.846	0.846	0.077	0.231	0.917	0.308	0.231	0.846	0.250	0.308	0.154	0.615	0.077	0.2308
1996	0.231	0.385	0.846	0.077	0.845	0.833	0.077	0.231	0.846	0.231	0.231	0.846	0.308	0.308	0.154	0.750	0.077	0.2308
1997	0.231	0.385	0.846	0.077	0.845	0.833	0.077	0.231	0.846	0.231	0.308	0.846	0.308	0.308	0.154	0.750	0.077	0.2308
1998	0.231	0.231	0.769	0.077	0.846	0.833	0.077	0.231	0.846	0.231	0.385	0.846	0.308	0.308	0.154	0.750	0.077	0.2308
1999	0.231	0.154	0.769	0.077	0.846	0.833	0.077	0.23I	0.846	0.154	0385	0.846	0.231	0.308	0.154	0.750	0.077	0.2308
2000	0331	0.154	0.769	0.077	0.846	0.846	0.077	0.231	0.846	0.231	0.462	0.846	0.231	0.308	0.154	0.750	0.077	0.2308
Average	0.406	0.436	0.833	0.077	0.846	0.877	0.141	0.389	0.889	0.462	0.265	0.859	0.562	0.496	0.218	0.768	0.077	0.26
1983–91	0.581	0.521	0.846	…	0.846	0.915	0.205	0.547	0.923	0.667	0.231	0.855	0.858	0.684	0.256	0.846	0.077	0.2991
1991–00	0.231	0.350	0.821	0.077	0.846	0.840	0.077	0.231	0.854	0.256	0.299	0.863	0.265	0.308	0.179	0.690	0.077	0.2308

Note: For a given country and year, the index represents the average over the 13 different dummies.Source: Author’s own data.

Table 3.

IMF Single-Dummy Indices

Table 3.

IMF Single-Dummy Indices

															Hong Kong
	Argentina	Australia	Austria	Belgium	Brazil	Canada	Chile	Colombia	Denmark	Ecuador	Finland	France	Germany	Greece	SAR	India
1983	1	1	1	0	1	0	1	1	1	0	1	1	0	1	0	1
1984	1	0	1	0	1	0	1	1	1	0	1	1	0	1	0	1
1985	1	0	1	0	1	0	1	1	1	0	1	1	0	1	0	1
1986	1	0	1	0	1	0	1	1	1	1	1	1	0	1	0	1
1987	1	0	1	0	1	0	1	1	1	1	1	1	0	1	0	1
1983	1	0	1	0	1	0	1	1	0	0	1	1	0	1	0	1
1989	1	0	1	0	1	0	1	1	0	0	1	1	0	1	0	1
1990	1	0	1	0	1	0	1	1	0	0	1	0	0	1	0	1
1991	1	0	0	0	1	0	1	1	0	0	0	0	0	1	0	1
1992	1	0	0	0	1	0	1	1	0	0	0	0	0	1	0	1
1993	0	0	0	0	1	0	1	1	0	1	0	0	0	1	0	1
1994	0	0	0	0	1	0	1	1	0	1	0	0	0	1	0	1
1995	0	0	0	0	1	0	1	1	0	0	0	0	0	1	0	1
Average	0.769	0.077	0.615	0	1	0	1	1	0.385	0.308	0.615	0.538	0	1	0	1
1983–88	1	0.167	1	0	1	0	1	1	0.833	0.333	1	1	0	1	0	1
1989–95	0.571	0	0.286	0	1	0	1	1	0	0.286	0.286	0.143	0	1	0	1

	Italy	Japan	Korea	Mexico	Norway	Philippines	Portugal	S. Africa	Spain	Sweden	Switzerland	Turkey
1983	1	0	1	1	1	1	1	1	1	1	…	1
1984	1	0	1	1	1	1	1	1	1	1	…	1
1985	1	0	1	1	1	1	1	1	1	1	…	1
1986	1	0	1	1	1	1	1	1	1	1	…	1
1987	1	0	1	1	1	1	1	1	1	1	…	1
1988	1	0	1	1	1	1	1	1	1	1	…	1
1989	1	0	1	1	1	1	1	1	1	1	…	1
1990	0	0	1	1	1	1	1	1	1	1	…	1
1991	0	0	1	1	1	1	1	1	1	1	…	1
1992	0	0	1	1	1	1	1	1	1	1	0	1
1993	0	0	1	1	1	1	0	1	1	0	0	1
1994	0	0	1	1	1	1	0	1	0	0	0	1
1995	0	1	1	1	0	1	0	1	0	0	0	1
Average	0.538	0.077	1	1	0.923	1	0.769	1	0.846	0.769	0	1
1983–88	1	0	1	1	1	1	1	1	1	1	…	1
1989–95	0.143	0.143	1	1	0.857	1	0.571	1	0.714	0.571	0	1

Table 3.

IMF Single-Dummy Indices

															Hong Kong
	Argentina	Australia	Austria	Belgium	Brazil	Canada	Chile	Colombia	Denmark	Ecuador	Finland	France	Germany	Greece	SAR	India
1983	1	1	1	0	1	0	1	1	1	0	1	1	0	1	0	1
1984	1	0	1	0	1	0	1	1	1	0	1	1	0	1	0	1
1985	1	0	1	0	1	0	1	1	1	0	1	1	0	1	0	1
1986	1	0	1	0	1	0	1	1	1	1	1	1	0	1	0	1
1987	1	0	1	0	1	0	1	1	1	1	1	1	0	1	0	1
1983	1	0	1	0	1	0	1	1	0	0	1	1	0	1	0	1
1989	1	0	1	0	1	0	1	1	0	0	1	1	0	1	0	1
1990	1	0	1	0	1	0	1	1	0	0	1	0	0	1	0	1
1991	1	0	0	0	1	0	1	1	0	0	0	0	0	1	0	1
1992	1	0	0	0	1	0	1	1	0	0	0	0	0	1	0	1
1993	0	0	0	0	1	0	1	1	0	1	0	0	0	1	0	1
1994	0	0	0	0	1	0	1	1	0	1	0	0	0	1	0	1
1995	0	0	0	0	1	0	1	1	0	0	0	0	0	1	0	1
Average	0.769	0.077	0.615	0	1	0	1	1	0.385	0.308	0.615	0.538	0	1	0	1
1983–88	1	0.167	1	0	1	0	1	1	0.833	0.333	1	1	0	1	0	1
1989–95	0.571	0	0.286	0	1	0	1	1	0	0.286	0.286	0.143	0	1	0	1

	Italy	Japan	Korea	Mexico	Norway	Philippines	Portugal	S. Africa	Spain	Sweden	Switzerland	Turkey
1983	1	0	1	1	1	1	1	1	1	1	…	1
1984	1	0	1	1	1	1	1	1	1	1	…	1
1985	1	0	1	1	1	1	1	1	1	1	…	1
1986	1	0	1	1	1	1	1	1	1	1	…	1
1987	1	0	1	1	1	1	1	1	1	1	…	1
1988	1	0	1	1	1	1	1	1	1	1	…	1
1989	1	0	1	1	1	1	1	1	1	1	…	1
1990	0	0	1	1	1	1	1	1	1	1	…	1
1991	0	0	1	1	1	1	1	1	1	1	…	1
1992	0	0	1	1	1	1	1	1	1	1	0	1
1993	0	0	1	1	1	1	0	1	1	0	0	1
1994	0	0	1	1	1	1	0	1	0	0	0	1
1995	0	1	1	1	0	1	0	1	0	0	0	1
Average	0.538	0.077	1	1	0.923	1	0.769	1	0.846	0.769	0	1
1983–88	1	0	1	1	1	1	1	1	1	1	…	1
1989–95	0.143	0.143	1	1	0.857	1	0.571	1	0.714	0.571	0	1

Table 4.

Lane and MiIesi-Ferretti Indices

Source: Author’s own computations using data provided by Gian-Maria Milesi-Ferretti.Note: The indices are computed as portfolio and direct investment assets and liabilities as a share of GDP.

Table 4.

Lane and MiIesi-Ferretti Indices

	Argentina	Australia	Austria	Belgium	Brazil	Canada	Chile	Colombia	Denmark	Ecuador	Finland	France	Germany	India	Italy	Japan
1983	0.027	0.217	0.061	0.183	0.099	0.330	0.084	0.078	…	0.087	…	0.119	0.111	0.005	…	0.060
1984	0.038	0.190	0.064	0.179	0.098	0.326	0.089	0.087	…	0.086	…	0.125	0.116	0.004	…	0.059
1983	0.046	0.248	0.088	0.235	0.099	0.346	0.076	0.107	…	0.063	…	0.167	0.185	0.004	…	0.076
1986	0.047	0.342	0.087	0.242	0.104	0.388	0.094	0.122	…	0.080	0.066	0.173	0.187	0.004	…	0080
1987	0.041	0.387	0.092	0.272	0.093	0.418	0.126	0.127	…	0.084	0.081	0.182	0.163	0.006	…	0.080
1988	0.057	0.427	0.095	0.339	0.090	0.409	0.154	0.120	…	0.096	0.097	0.197	0.172	0.006	…	0.090
1989	0.047	0.438	0.136	0.538	0.090	0.417	0.183	0.127	…	0.112	0.123	0.258	0.236	0.007	0.094	0.119
1990	0.124	0.434	0.130	0.538	0.094	0.405	0.209	0.133	…	0.119	0.138	0.251	0.199	0.007	0.099	0.119
1991	0.110	0.484	0.136	0.730	0.108	0.436	0.234	0.138	0.207	0.122	0.146	0.304	0.203	0.006	0.105	0.136
1992	0.131	0.487	0.130	0.950	0.124	0.450	0.249	0.138	0.596	0.136	0.143	0.302	0.190	0.009	0.088	0.120
1993	0.166	0.593	0.162	1.418	0.134	0.533	0.292	0.149	0.236	0.171	0.236	0.370	0.235	0.016	0.122	0.123
1994	0.174	0.606	0.187	1.588	0.175	0.576	0.424	0.185	0.322	0.194	0.334	0.401	0.255	0.033	0.135	0.139
1995	0.208	0.641	0.190	1.682	0.144	0.634	0.421	0.174	0.341	0.193	0.305	0.408	0.260	0.033	0.151	0.148
1996	0.231	0.655	0.233	1.996	0.165	0.713	0.444	0.228	0.389	0.203	0.384	0.452	0.311	0.046	0.155	0.177
1997	0.265	0.640	0.293	2.654	0.195	0.783	0.511	0.260	0.513	0.242	0.505	0.538	0.414	0.064	0.198	0.197
1998	0.267	0.783	0.383	4.381	0.209	0.936	0.592	0.305	0.636	0.263	1.066	0.683	0.587	0.063	0.282	0.259
Average	0.124	0473	0.154	1.124	0.126	0.506	0.261	0.155	0.355	0.141	0.279	0.308	0.239	0.019	0.143	0.124
1983–90	0.053	0.335	0.094	0.316	0.096	0.380	0.127	0.112	…	0.091	0.101	0.184	0.171	0.005	0.097	0.086
1991–98	0.194	0.611	0.214	1.925	0.157	0.633	0.396	0.197	0.355	0.190	0.390	0.432	0.307	0.034	0.154	0.162

	Korea	Malaysia	Mexico	Netherlands	Norway	Philippines	Portugal	Singapore	S. Africa	Spain	Sweden	Switzerland	Turkey	U.K.	U.S.
1983	0.017	0.278	0.092	0.654	0.097	0.033	…	0.672	0.055	0.087	0.121	0.403	0.011	0.484	0.121
1984	0.016	0.256	0.100	0.693	0.097	0.036	…	0.653	0.066	0.097	0.122	0.431	0.012	0.486	0.115
1985	0.024	0.293	0.089	0.942	0.128	0.040	…	0.819	0.086	0.130	0.174	0.724	0.013	0.643	0.132
1956	0.038	0.326	0.121	0.908	0.160	0.042	…	0.942	0.082	0.148	0.202	0.763	0.013	0.719	0.161
1987	0.042	0.301	0.134	0.906	0.175	0.047	…	1.044	0.072	0.174	0.220	0.723	0.014	0.779	0.188
1988	0.043	0.270	0.160	0.887	0.177	0.067	0.088	1.045	0.067	0.179	0.244	0.729	0.016	0.758	0.201
1989	0.043	0.287	0.147	1.111	0.230	0.072	0.136	1.089	0.066	0.216	0.327	0925	0.024	0.914	0.221
1990	0.047	0.302	0.156	1.008	0.241	0.071	0.161	1.113	0.057	0.218	0.370	0.748	0.026	0.863	0.220
1991	0.050	0.373	0.197	1.106	0.247	0.092	0.188	1 168	0.063	0.250	0.446	0.861	0.032	0.936	0.244
1992	0.062	0.437	0.218	1.004	0.200	0.092	0.179	1.103	0.072	0.227	0.388	0.874	0.036	0.853	0.242
1993	0.090	0.477	0.279	1.169	0.244	0.115	0.213	1.358	0.087	0.292	0.577	1.199	0.045	1.09S	0.275
1994	0.106	0.498	0.189	1.270	0.302	0.143	0.251	1.496	0.105	0.335	0.700	1,225	0.059	1.105	0.291
1995	0.108	0.492	0.293	1.301	0.312	0.149	0.236	1.579	0.158	0.355	0.841	1 354	0.056	1.200	0.332
1996	0.107	0.527	0.340	1.477	0.361	0.183	0.277	1.758	0.198	0.378	0.899	1,568	0.060	1.313	0.363
1997	0.088	0.460	0379	1780	0.418	0.136	0.379	1.837	0.301	0.451	1.119	2.265	0.081	1.301	0.396
1998	0.238	0.721	0.357	2.235	0.546	0.225	0.485	2.481	0.442	0.620	1.455	2.684	0.071	1.560	0.475
Average	0.070	0.394	0.203	1.153	0.246	0.096	1.1.236	1.260	0.124	0.260	0.513	1.092	0.035	0.938	0.249
1983–90	0.034	0.289	0.125	0.889	0.163	0.051	0129	0.922	0.069	0.156	0.222	0.681	0.016	0.706	0.170
1991–98	0.106	0.498	0.282	1.418	0.329	0.142	0.276	1.598	0.178	0.363	0.803	1.504	0.055	1.171	0.327

Source: Author’s own computations using data provided by Gian-Maria Milesi-Ferretti.Note: The indices are computed as portfolio and direct investment assets and liabilities as a share of GDP.

Table 4.

Lane and MiIesi-Ferretti Indices

	Argentina	Australia	Austria	Belgium	Brazil	Canada	Chile	Colombia	Denmark	Ecuador	Finland	France	Germany	India	Italy	Japan
1983	0.027	0.217	0.061	0.183	0.099	0.330	0.084	0.078	…	0.087	…	0.119	0.111	0.005	…	0.060
1984	0.038	0.190	0.064	0.179	0.098	0.326	0.089	0.087	…	0.086	…	0.125	0.116	0.004	…	0.059
1983	0.046	0.248	0.088	0.235	0.099	0.346	0.076	0.107	…	0.063	…	0.167	0.185	0.004	…	0.076
1986	0.047	0.342	0.087	0.242	0.104	0.388	0.094	0.122	…	0.080	0.066	0.173	0.187	0.004	…	0080
1987	0.041	0.387	0.092	0.272	0.093	0.418	0.126	0.127	…	0.084	0.081	0.182	0.163	0.006	…	0.080
1988	0.057	0.427	0.095	0.339	0.090	0.409	0.154	0.120	…	0.096	0.097	0.197	0.172	0.006	…	0.090
1989	0.047	0.438	0.136	0.538	0.090	0.417	0.183	0.127	…	0.112	0.123	0.258	0.236	0.007	0.094	0.119
1990	0.124	0.434	0.130	0.538	0.094	0.405	0.209	0.133	…	0.119	0.138	0.251	0.199	0.007	0.099	0.119
1991	0.110	0.484	0.136	0.730	0.108	0.436	0.234	0.138	0.207	0.122	0.146	0.304	0.203	0.006	0.105	0.136
1992	0.131	0.487	0.130	0.950	0.124	0.450	0.249	0.138	0.596	0.136	0.143	0.302	0.190	0.009	0.088	0.120
1993	0.166	0.593	0.162	1.418	0.134	0.533	0.292	0.149	0.236	0.171	0.236	0.370	0.235	0.016	0.122	0.123
1994	0.174	0.606	0.187	1.588	0.175	0.576	0.424	0.185	0.322	0.194	0.334	0.401	0.255	0.033	0.135	0.139
1995	0.208	0.641	0.190	1.682	0.144	0.634	0.421	0.174	0.341	0.193	0.305	0.408	0.260	0.033	0.151	0.148
1996	0.231	0.655	0.233	1.996	0.165	0.713	0.444	0.228	0.389	0.203	0.384	0.452	0.311	0.046	0.155	0.177
1997	0.265	0.640	0.293	2.654	0.195	0.783	0.511	0.260	0.513	0.242	0.505	0.538	0.414	0.064	0.198	0.197
1998	0.267	0.783	0.383	4.381	0.209	0.936	0.592	0.305	0.636	0.263	1.066	0.683	0.587	0.063	0.282	0.259
Average	0.124	0473	0.154	1.124	0.126	0.506	0.261	0.155	0.355	0.141	0.279	0.308	0.239	0.019	0.143	0.124
1983–90	0.053	0.335	0.094	0.316	0.096	0.380	0.127	0.112	…	0.091	0.101	0.184	0.171	0.005	0.097	0.086
1991–98	0.194	0.611	0.214	1.925	0.157	0.633	0.396	0.197	0.355	0.190	0.390	0.432	0.307	0.034	0.154	0.162

	Korea	Malaysia	Mexico	Netherlands	Norway	Philippines	Portugal	Singapore	S. Africa	Spain	Sweden	Switzerland	Turkey	U.K.	U.S.
1983	0.017	0.278	0.092	0.654	0.097	0.033	…	0.672	0.055	0.087	0.121	0.403	0.011	0.484	0.121
1984	0.016	0.256	0.100	0.693	0.097	0.036	…	0.653	0.066	0.097	0.122	0.431	0.012	0.486	0.115
1985	0.024	0.293	0.089	0.942	0.128	0.040	…	0.819	0.086	0.130	0.174	0.724	0.013	0.643	0.132
1956	0.038	0.326	0.121	0.908	0.160	0.042	…	0.942	0.082	0.148	0.202	0.763	0.013	0.719	0.161
1987	0.042	0.301	0.134	0.906	0.175	0.047	…	1.044	0.072	0.174	0.220	0.723	0.014	0.779	0.188
1988	0.043	0.270	0.160	0.887	0.177	0.067	0.088	1.045	0.067	0.179	0.244	0.729	0.016	0.758	0.201
1989	0.043	0.287	0.147	1.111	0.230	0.072	0.136	1.089	0.066	0.216	0.327	0925	0.024	0.914	0.221
1990	0.047	0.302	0.156	1.008	0.241	0.071	0.161	1.113	0.057	0.218	0.370	0.748	0.026	0.863	0.220
1991	0.050	0.373	0.197	1.106	0.247	0.092	0.188	1 168	0.063	0.250	0.446	0.861	0.032	0.936	0.244
1992	0.062	0.437	0.218	1.004	0.200	0.092	0.179	1.103	0.072	0.227	0.388	0.874	0.036	0.853	0.242
1993	0.090	0.477	0.279	1.169	0.244	0.115	0.213	1.358	0.087	0.292	0.577	1.199	0.045	1.09S	0.275
1994	0.106	0.498	0.189	1.270	0.302	0.143	0.251	1.496	0.105	0.335	0.700	1,225	0.059	1.105	0.291
1995	0.108	0.492	0.293	1.301	0.312	0.149	0.236	1.579	0.158	0.355	0.841	1 354	0.056	1.200	0.332
1996	0.107	0.527	0.340	1.477	0.361	0.183	0.277	1.758	0.198	0.378	0.899	1,568	0.060	1.313	0.363
1997	0.088	0.460	0379	1780	0.418	0.136	0.379	1.837	0.301	0.451	1.119	2.265	0.081	1.301	0.396
1998	0.238	0.721	0.357	2.235	0.546	0.225	0.485	2.481	0.442	0.620	1.455	2.684	0.071	1.560	0.475
Average	0.070	0.394	0.203	1.153	0.246	0.096	1.1.236	1.260	0.124	0.260	0.513	1.092	0.035	0.938	0.249
1983–90	0.034	0.289	0.125	0.889	0.163	0.051	0129	0.922	0.069	0.156	0.222	0.681	0.016	0.706	0.170
1991–98	0.106	0.498	0.282	1.418	0.329	0.142	0.276	1.598	0.178	0.363	0.803	1.504	0.055	1.171	0.327

Source: Author’s own computations using data provided by Gian-Maria Milesi-Ferretti.Note: The indices are computed as portfolio and direct investment assets and liabilities as a share of GDP.

global Trend Toward Capital Account Liberalization

Most economists agree that in the past two decades the world has slowly but steadily moved toward greater capital account openness. While this trend may have been deeper in developed countries, it was not necessarily restricted to them.¹⁶ To see whether the disaggregated indices capture this trend, I computed a global index for each year by simply averaging over the individual country indices. I also computed a global index from the single dummies and the LMF measure.¹⁷ As can be seen in Figure 1, the disaggregated global index (labeled “Miniane” index in the figure) exhibits a pronounced and continued downward trend, from a peak near 0.7 in 1983 to a low around 0.41 in 1999–2000. It is also interesting to note that the downward trend seems to accelerate from the late 1980s to early 1990s. As I show in the next subsection, this is precisely the period during which many European and some Latin American countries were opening their capital accounts.

The single-dummy and LMF measures exhibit a similar downward trend despite a reversal in the mid- to late 1990s for the former.¹⁸ An important difference between the three processes is that, in the case of the IMF dummy, the trend is driven solely by developed countries. To illustrate this, Figures 2 and 3 repeat the exercise in Figure 1 by constructing developing and developed countries subindices for each of the three measures.¹⁹ All of them fall considerably throughout the period for the group of developed countries, but only the disaggregated and LMF measures fall for developing nations. The IMF dummy is flat (or increases) for much of the period and falls only in the last year of the sample.

Showing a more detailed perspective, Table 5 computes pairwise time-series correlations between global indices. While these are generally high (above 75 percent), they fall substantially to around 50 percent in the case of the developing countries’ single-dummy subindex. Table 5 also computes for each of the three measures the share of countries for which the country-specific index was higher on average in the first half than in the second half of the period. That share is 100 percent, 82 percent, and 36 percent for the LMF, disaggregated, and single-dummy measures, respectively. In the case of developing countries, the IMF single dummy falls from the first to the second half in just 17 percent of the countries. In short, the single dummies belie the fact that liberalization has also occurred in developing nations, albeit at a slower rate than in developed ones.

Table 5.

Summary Statistics for Global Trends

Source: Author’s own computations.Note: The liberalization measure computes the percentage of countries in which the value for the second half of the period was lower than for the first half.

Table 5.

Summary Statistics for Global Trends

Correlation Between Global Indices
		Miniane	LMF	IMF dummy
	Miniane	1
All countries	LMF	82%	1
	IMF dummy	95%	94%	1
	Miniane	1
Developed	LMF	77%	1
	IMF dummy	95%	93%	1
	Miniane	1
Developing	LMF	90%	1
	IMF dummy	48%	54%	1
Liberalization Measure
	Miniane		82%
All countries	LMF		100%
	IMF dummy		36%
	Miniane		86%
Developed	LMF		100%
	IMF dummy		48%
	Miniane		75%
Developing	LMF		100%
	IMF dummy		17%

Source: Author’s own computations.Note: The liberalization measure computes the percentage of countries in which the value for the second half of the period was lower than for the first half.

Table 5.

Summary Statistics for Global Trends

Correlation Between Global Indices
		Miniane	LMF	IMF dummy
	Miniane	1
All countries	LMF	82%	1
	IMF dummy	95%	94%	1
	Miniane	1
Developed	LMF	77%	1
	IMF dummy	95%	93%	1
	Miniane	1
Developing	LMF	90%	1
	IMF dummy	48%	54%	1
Liberalization Measure
	Miniane		82%
All countries	LMF		100%
	IMF dummy		36%
	Miniane		86%
Developed	LMF		100%
	IMF dummy		48%
	Miniane		75%
Developing	LMF		100%
	IMF dummy		17%

Source: Author’s own computations.Note: The liberalization measure computes the percentage of countries in which the value for the second half of the period was lower than for the first half.

Cross-Sectional Comparisons

To compare the indices not through time but cross-sectionally, Table 6 ranks the countries from most to least open according to the three measures. For each measure, a country’s index is computed as the average value across all years in the sample. Note that, in the case of the single dummies, all countries up to the United States rank as equally open, and all countries below Brazil as equally closed.²⁰ Reassuringly, the rankings are pretty similar across measures. If one decomposes the sample in three groups according to the IMF single dummy (above the United States, between the United States and Brazil, and below Brazil), then five out of nine countries in the top group also rank among the top nine in the two other measures.²¹

Table 6.

Cross-Sectional Comparison

Source: Author’s own computations.Notes: The ranking is from most to least open. In the IMF dummy ranking, all countries above the United States are tied with the United States, and all countries below Brazil are tied with Brazil. An asterisk denotes that the country appears in the same group in all three measures (see text for details).

Table 6.

Cross-Sectional Comparison

Ranking of Countries
Miniane	LMF	IMF Dummy
United Kingdom	Singapore	Belgium
Netherlands	Netherlands	Canada*
Canada	Belgium	Germany
Switzerland	Switzerland	Malaysia
Germany	United Kingdom	Netherlands*
Denmark	Sweden	Singapore*
Singapore	Canada	Switzerland*
United States	Australia	United Kingdom*
Norway	Malaysia	United States
Italy	Denmark	Australia
Japan	France	Japan
France	Finland	Ecuador
Austria	Chile	Denmark
Portugal	Spain	France*
Australia	United States	Italy*
Sweden	Norway	Finland*
Greece	Germany	Austria*
Belgium	Portugal	Sweden
Finland	Mexico	Portugal*
Spain	Colombia	Argentina
Ecuador	Austria	Spain*
Argentina	Italy	Norway
Turkey	Ecuador	Brazil*
Korea	Brazil	Chile
Malaysia	Japan	Colombia
South Africa	Argentina	Greece
Mexico	South Africa	India*
Philippines	Philippines	Korea*
India	Korea	Mexico
Colombia	Turkey	Philippines*
Brazil	India	South Africa*
Chile		Turkey*
Cross-Sectional Correlation
Miniane	LMF	IMF dummy
1
59%	1
73%	66%	1

Table 6.

Cross-Sectional Comparison

Ranking of Countries
Miniane	LMF	IMF Dummy
United Kingdom	Singapore	Belgium
Netherlands	Netherlands	Canada*
Canada	Belgium	Germany
Switzerland	Switzerland	Malaysia
Germany	United Kingdom	Netherlands*
Denmark	Sweden	Singapore*
Singapore	Canada	Switzerland*
United States	Australia	United Kingdom*
Norway	Malaysia	United States
Italy	Denmark	Australia
Japan	France	Japan
France	Finland	Ecuador
Austria	Chile	Denmark
Portugal	Spain	France*
Australia	United States	Italy*
Sweden	Norway	Finland*
Greece	Germany	Austria*
Belgium	Portugal	Sweden
Finland	Mexico	Portugal*
Spain	Colombia	Argentina
Ecuador	Austria	Spain*
Argentina	Italy	Norway
Turkey	Ecuador	Brazil*
Korea	Brazil	Chile
Malaysia	Japan	Colombia
South Africa	Argentina	Greece
Mexico	South Africa	India*
Philippines	Philippines	Korea*
India	Korea	Mexico
Colombia	Turkey	Philippines*
Brazil	India	South Africa*
Chile		Turkey*
Cross-Sectional Correlation
Miniane	LMF	IMF dummy
1
59%	1
73%	66%	1

For the middle and lower groups, this number is 6 out of 13 and 6 out of 10 respectively. In other words, the measures agree pretty closely about which countries are very open or very closed and less so about the middle ground.

If one computes cross-country correlations (also in Table 6), the correlation is highest between the two AREAER-based measures (73 percent). This is not surprising given that they share a common source of information. Correlations remain relatively high (around 60 percent) with respect to the LMF measure. Finally, note that many countries in the single-dummy classification are shown as having no restrictions in any year (see Table 3). This is a fallacy that is refuted by the text in the AREAER itself. Indeed, no country in the disaggregated sample ever shows an index of zero for any year. This can be partly explained by the fact that the single dummies account only for controls on outflows as noted by Eichengreen (2001).

Country-Specific Liberalization Episodes

So far, comparisons between measures have dealt with general time-series or cross-sectional trends. The purpose of this section is to study specific liberalization episodes and show how these episodes are tracked by the disaggregated index but not by the single dummy. The LMF measure cannot be used to date liberalization episodes, as it shows a rather smooth opening throughout the period for all countries in the sample. Table 7 summarizes the measures undertaken during 16 liberalization/ tightening episodes captured by the disaggregated index.²²

Table 7.

Summary of Main Liberalization/ Tightening Episodes Captured in the Data

Table 7.

Summary of Main Liberalization/ Tightening Episodes Captured in the Data

Country	Changes in the Index	Summary of Main Measures Undertaken
Argentina	Drops from 0.92 in 1986 to 0.31 in 1996	- September I and November 9, 1989: Liberalization of FDI, which can now be undertaken without prior approval and is subject to the same laws as those governing resident investors.
		- December 20, 1989: Foreign borrowing and lending are liberalized and proceeds from all loans are transacted in the free exchange market.
		- September 8, 1993: Elimination of remaining restrictions on the repatriation of capital and profits.
Austria	Drops from 0.69 in 1988 to 0.31 in 1991	- February 1, 1989: All restrictions on long-term transfers are abolished, except the issuance of securities on foreign capital markets and of foreign securities in domestic markets.
		- November 4, 1991: Foreign exchange controls are abolished.
Belgium	Drops from 0.46 in 1998 to 0.15 in 1999	- April 5, 1999: Most controls on transactions with securities of non-EU origin are eliminated.
Denmark	Drops from 0.69 in 1983 to 0.08 in 1990	- January 1, 1984: Purchases by residents of foreign shares listed on the stock exchange are freed, as are investments by nonresidents in futures markets.
		- June 11, 1985: The length of period allowed for residents’ foreign exchange accounts in Danish banks is extended from one to three months. FDI of less than DKr 10 million no longer requires permission, compared with an earlier ceiling of DKr 5 million. Finally, the minimum maturity for finance loans contracted abroad is lowered from five years to one year.
		- October 1, 1988: Elimination of all remaining restrictions on inward and outward capital movements, excepting some teal estate transactions.
Ecuador	Drops from 0.85 in 1983 to 0.39 in 2000	- April 5, 1983: Foreign loans with maturity of 18 months or more are authorized by the Central Bank.
		- January 9, 1984: Authorization is granted for FDI in the insurance, reinsurance, commercial banking, and financial companies sectors. Moreover, the limit on repatriation of profits is raised from 20 percent to 30 percent.
		- July 29, 1987: Relaxation of ceilings on nonresidents’ equity participation in domestic companies despite setbacks in sectors such as communications or internal transport.
		- June 13, 1991: Limits on profit remittances are abolished.
		- December 29, 1993: Income tax rates on foreign companies are aligned with those of domestic companies.
		- January 25, 1994: Public sector foreign loan disbursements are no longer subject to commission.
		- January 27, 2000: Unification of reserve requirements for foreign currency-denominated and sucre-denominated accounts.
Finland	Drops from 0.92 in 1988 to 0.15 in 2000	- June 1, 1989: Regulations on FDI in the financial and insurance sectors are liberalized.
		- September 1, 1989: Regulations on outward and inward capital transfers are broadly liberalized.
		- December 19, 1989: Issues of markka-denominated bonds and shares abroad by residents or at home by nonresidents are liberalized.
		- September 1, 1990: Residents are allowed to purchase and sell derivative instruments on foreign shares.
		- January 1, 1991: Foreign exchange controls are abolished except those regarding the raising of loans abroad by private individuals.
		- January 1, 1992: Nonresidents are allowed to own shares in Finnish investment trusts.
		- January 1, 1993: Nonresidents are allowed to purchase Finnish securities and own Finnish corporations without restriction. Real estate transactions are liberalized,
		- January 1, 2000: Final relaxation of real estate transactions.
France	Drops from 0.69 in 1987 to 0.23 in 1998	- June 1, 1988: Restrictions on foreign borrowing are abolished. Domestic enterprises are allowed to operate foreign currency accounts in France or abroad.
		- September 24, 1988: EC residents are no longer required to obtain authorization for direct investments, except when there is actual acquisition of the firm.
		- March 9, 1989: All exchange restrictions for capital transactions by banks and enterprises are abolished. Residents of all OECD countries are allowed to issue foreign securities in France.
		- January 1, 1990: Finns based in OECD countries are permitted to issue securities in France.
		- October 31, 1998: The issuance of euro-franc securities is liberalized.
		- December 31, 1998: The issuance of certificates of deposits is liberalized.
Greece	Drops from 0.92 in 1985 to 0.08 in 1994	- May 19, 1986; All restrictions applying to EC residents on the liquidation of investments and repatriation of profits are eliminated.
		- November 23, 1988: FDI laws pertaining to EC residents are liberalized. Personal capital transfers to EC residents are completely liberalized.
		- March 9, 1989: Exporting firms are allowed to contract foreign exchange loans of maturity less than six months.
		- July 1, 1989: Remaining restrictions on direct investments by EC residents are abolished.
		- August 20. 1990: Restrictions are lifted on the repatriation of profits, dividends, interest, amortization, or liquidated capital for non-EC residents.
		- June 11, 1992: Residents are allowed to acquire shares and bonds issued by non-EC entities under the same terms and conditions as those applied in EC member countries.
		- June 17, 1992: Credit institutions are allowed to lend to individuals permanently residing abroad.
		- March 23, 1993: All capital transactions with EU countries are liberalized, except credits with maturity of less than one year.
		- June 30, 1993: All capital transactions with non-EU countries are liberalized with some individual exceptions.
		- May 16, 1994: Remaining controls on short-term capital movements are abolished.
Hong Kong	Increases from 0.08 in 1997 to 0.23 in 1998	- September 7, 1998: The Hong Kong Stock Exchange reinstates the tick rule for short-selling and reviewed the list of securities eligible for short-selling.
		- August 31, 1998: The Hong Kong Futures Exchange imposes a special margin on open positions exceeding 10,000 contracts.
Italy	Drops from 0.77 in 1987 to 0.23 in 1990	- October 1, 1988: All but some restrictions on commercial and financial transactions by residents with nonresidents are abolished.
		- January 19, 1990: Residents are allowed to purchase short-term bonds and money market securities issued or payable abroad.
		- May 14, 1990: The remaining restrictions on banks’ foreign exchange management are lifted.
Japan	Drops from 0.69 in 1983 to 0.15 in 1999	- April 1, 1983: Banks are allowed to issue bonds abroad through their subsidiaries.
		- June 6, 1983: Liberalization of short-term euro-yen lending by Japanese banks.
		- April 1, 1984; Restrictions on sales of yen-denominated securities by foreign banks are eased.
		- August 1, 1984: Japanese brokers are allowed to enter international brokerage excepting transactions between the yen and the U.S. dollar.
		- July 1, 1985: Authorization is granted to foreign banks to participate in the trust banking business in Japan, including the management of corporate pension funds.
		- April 1, 1986: The ceiling on foreign currency-denominated assets purchases by pension funds is eased.
		- August 15, 1986: A similar easing is approved for the insurance sector.
		- May 22, 1987: Certain banks and securities companies are allowed to transact financial futures abroad for their own accounts.
		- January 9, 1988: Issuance of commercial paper by nonresidents is permitted.
		- June 16, 1989: The issuance of yen-denominated bonds abroad by nonresidents is fully liberalized.
		- July 30, 1990: Foreign deposit accounts are liberalized.
		- April 26, 1991: Reporting requirements for FDI are eased.
		- January 1, 1993: Further liberalization of FDI reporting requirements. With some exceptions, foreign investors are now required to report their investments only ex post.
		- August 2, 1995: Wide-ranging measures to promote overseas investments and loans by institutional investors, including liberalization of foreign currency-denominated loans and removal of restrictions of yen-denominated external loans.
		- January 1, 1998: Limits on pension funds’ foreign exchange investments are removed.
		- April 1, 1998: The prior notice requirement for portfolio and direct investments abroad by residents is abolished.
		- April 1, 1998: The waiting period for loans extended to nonresidents is abolished.
Netherlands	Drops from 0.46 in 1985 to 0.08 in 1986	- January 1, 1986: Restrictions on capital movements are lifted.
Norway	Drops from 0.77 in 1983 to 0.23 in 1989	- June 8, 1984: Foreign banks are allowed to operate in Norway subject to the same general conditions as Norwegian banks.
		- June 15, 1984: Residents are allowed to purchase (quoted) foreign shares as well as foreign bonds.
		- May 9, 1988: Nonresidents are allowed to purchase long-term bonds denominated in Norwegian kroner.
		- June 14, 1988: Residents are allowed to incur or provide commercial and financial guarantee obligations abroad.
		- June 30, 1989: Residents are allowed to acquire shares of foreign collective investment funds without prior athorization.
		- December 8, 1989: Individuals are allowed to obtain foreign currency loans abroad subject to a license. Legal entities are allowed to engage in financial leasing in foreign currencies with Norwegian banks without prior authorization and with foreign banks with liberally granted authorization.
Portugal	Drops from 0.92 in 1985 to 0.15 in 1999	- January 1, 1986: Most capital transactions with EC residents are freed.
		- July 18, 1986: Authorization procedures for FDI are eased.
		- February 2,1989: Limits above which medium-and long-term capital transactions require approval are raised.
		- July 1, 1990: Investment in foreign securities listed in recognized exchanges are fully liberalized.
		- June 14, 1991: Restrictions on direct and real estate investment abroad by residents are eased.
		- September 1 and November 26, 1992: Financial credits from abroad are liberalized.
		- December 16, 1992: Easing of restrictions on escudo deposits for nonresidents, demand and term deposits abroad by residents, acquisition of money-market instruments by nonresidents, short-term lending in escudos to nonresidents, and foreign exchange operations between nonbank residents and nonresidents.
		- November 28, 1995: Remaining restrictions on FDI are lifted.
		- March 1, 1999: Abolition of controls on the introduction of foreign securities issued by residents of a non-EU member country that were not quoted on the issuer’s country or on the country of issuance.
Spain	Drops from 0.92 in 1985 to 0.25 in 1992	- April 1, 1986: Easing of restrictions on residents’ foreign currency-denominated financial loans.
		- June 27 and September 25, 1986: Authorization is no longer required for FDI in oil refining, mining, sea transport, and insurance.
		- November 7, 1986: Investments abroad by residents are liberalized, including portfolio investments.
		- March 13, 1987: Limits on foreign loans not related to merchandise trade are raised to pesetas 1.5 million.
		- May 25, 1987: Investments abroad are further liberalized, with real estate investments partially liberalized for the first time.
		- June 10, 1988: The minimum maturity period of foreign currency borrowing not subject to authorization is raised to three years.
		- December 19, 1988: Direct investments abroad in companies engaged in portfolio and real estate investment activities are permitted.
		- April 4, 1990: Remaining restrictions on purchases of foreign monetary instruments by residents are removed.
		- June 22, 1990: Residents are allowed to purchase securities denominated in pesetas and issued in Spain by nonresidents.
		- July 8, 1990: Nonresidents are allowed to freely purchase securities in Spanish exchanges.
		- December 27, 1990: Most remaining regulations limiting portfolio investments by residents abroad and by nonresidents in Spain are abolished.
		- April 16, 1991: Residents are allowed to maintain accounts in foreign currency in authorized banks.
		- July 1, 1992: Most remaining controls on capital transfers are abolished.
Sweden	Drops from 0.85 in 1983 to 0.31 in 1992	- February 21 and May 22, 1984: Restrictions on the maturity and amount of foreign currency borrowing are eased.
		- April 14 and June 24, 1986: Restrictions on direct investment abroad by residents are eased.
		- March 25, 1986: Residents are allowed to purchase derivative instruments on foreign securities.
		- March 1, 1987: Further easing of restrictions of foreign borrowing.
		- January 9, 1989: All restrictions on the acquisition of foreign equity are abolished.
		- July 1, 1989: Virtually all remaining currency regulations are abolished, but transactions must still be carried through an authorized Swedish bank or broker.
		- January 1, 1992: Transactions need no longer be carried through authorized currency traders.
		- December 31, 1992: Residents are authorized to deposit funds in foreign banks.

Table 7.

Summary of Main Liberalization/ Tightening Episodes Captured in the Data

Country	Changes in the Index	Summary of Main Measures Undertaken
Argentina	Drops from 0.92 in 1986 to 0.31 in 1996	- September I and November 9, 1989: Liberalization of FDI, which can now be undertaken without prior approval and is subject to the same laws as those governing resident investors.
		- December 20, 1989: Foreign borrowing and lending are liberalized and proceeds from all loans are transacted in the free exchange market.
		- September 8, 1993: Elimination of remaining restrictions on the repatriation of capital and profits.
Austria	Drops from 0.69 in 1988 to 0.31 in 1991	- February 1, 1989: All restrictions on long-term transfers are abolished, except the issuance of securities on foreign capital markets and of foreign securities in domestic markets.
		- November 4, 1991: Foreign exchange controls are abolished.
Belgium	Drops from 0.46 in 1998 to 0.15 in 1999	- April 5, 1999: Most controls on transactions with securities of non-EU origin are eliminated.
Denmark	Drops from 0.69 in 1983 to 0.08 in 1990	- January 1, 1984: Purchases by residents of foreign shares listed on the stock exchange are freed, as are investments by nonresidents in futures markets.
		- June 11, 1985: The length of period allowed for residents’ foreign exchange accounts in Danish banks is extended from one to three months. FDI of less than DKr 10 million no longer requires permission, compared with an earlier ceiling of DKr 5 million. Finally, the minimum maturity for finance loans contracted abroad is lowered from five years to one year.
		- October 1, 1988: Elimination of all remaining restrictions on inward and outward capital movements, excepting some teal estate transactions.
Ecuador	Drops from 0.85 in 1983 to 0.39 in 2000	- April 5, 1983: Foreign loans with maturity of 18 months or more are authorized by the Central Bank.
		- January 9, 1984: Authorization is granted for FDI in the insurance, reinsurance, commercial banking, and financial companies sectors. Moreover, the limit on repatriation of profits is raised from 20 percent to 30 percent.
		- July 29, 1987: Relaxation of ceilings on nonresidents’ equity participation in domestic companies despite setbacks in sectors such as communications or internal transport.
		- June 13, 1991: Limits on profit remittances are abolished.
		- December 29, 1993: Income tax rates on foreign companies are aligned with those of domestic companies.
		- January 25, 1994: Public sector foreign loan disbursements are no longer subject to commission.
		- January 27, 2000: Unification of reserve requirements for foreign currency-denominated and sucre-denominated accounts.
Finland	Drops from 0.92 in 1988 to 0.15 in 2000	- June 1, 1989: Regulations on FDI in the financial and insurance sectors are liberalized.
		- September 1, 1989: Regulations on outward and inward capital transfers are broadly liberalized.
		- December 19, 1989: Issues of markka-denominated bonds and shares abroad by residents or at home by nonresidents are liberalized.
		- September 1, 1990: Residents are allowed to purchase and sell derivative instruments on foreign shares.
		- January 1, 1991: Foreign exchange controls are abolished except those regarding the raising of loans abroad by private individuals.
		- January 1, 1992: Nonresidents are allowed to own shares in Finnish investment trusts.
		- January 1, 1993: Nonresidents are allowed to purchase Finnish securities and own Finnish corporations without restriction. Real estate transactions are liberalized,
		- January 1, 2000: Final relaxation of real estate transactions.
France	Drops from 0.69 in 1987 to 0.23 in 1998	- June 1, 1988: Restrictions on foreign borrowing are abolished. Domestic enterprises are allowed to operate foreign currency accounts in France or abroad.
		- September 24, 1988: EC residents are no longer required to obtain authorization for direct investments, except when there is actual acquisition of the firm.
		- March 9, 1989: All exchange restrictions for capital transactions by banks and enterprises are abolished. Residents of all OECD countries are allowed to issue foreign securities in France.
		- January 1, 1990: Finns based in OECD countries are permitted to issue securities in France.
		- October 31, 1998: The issuance of euro-franc securities is liberalized.
		- December 31, 1998: The issuance of certificates of deposits is liberalized.
Greece	Drops from 0.92 in 1985 to 0.08 in 1994	- May 19, 1986; All restrictions applying to EC residents on the liquidation of investments and repatriation of profits are eliminated.
		- November 23, 1988: FDI laws pertaining to EC residents are liberalized. Personal capital transfers to EC residents are completely liberalized.
		- March 9, 1989: Exporting firms are allowed to contract foreign exchange loans of maturity less than six months.
		- July 1, 1989: Remaining restrictions on direct investments by EC residents are abolished.
		- August 20. 1990: Restrictions are lifted on the repatriation of profits, dividends, interest, amortization, or liquidated capital for non-EC residents.
		- June 11, 1992: Residents are allowed to acquire shares and bonds issued by non-EC entities under the same terms and conditions as those applied in EC member countries.
		- June 17, 1992: Credit institutions are allowed to lend to individuals permanently residing abroad.
		- March 23, 1993: All capital transactions with EU countries are liberalized, except credits with maturity of less than one year.
		- June 30, 1993: All capital transactions with non-EU countries are liberalized with some individual exceptions.
		- May 16, 1994: Remaining controls on short-term capital movements are abolished.
Hong Kong	Increases from 0.08 in 1997 to 0.23 in 1998	- September 7, 1998: The Hong Kong Stock Exchange reinstates the tick rule for short-selling and reviewed the list of securities eligible for short-selling.
		- August 31, 1998: The Hong Kong Futures Exchange imposes a special margin on open positions exceeding 10,000 contracts.
Italy	Drops from 0.77 in 1987 to 0.23 in 1990	- October 1, 1988: All but some restrictions on commercial and financial transactions by residents with nonresidents are abolished.
		- January 19, 1990: Residents are allowed to purchase short-term bonds and money market securities issued or payable abroad.
		- May 14, 1990: The remaining restrictions on banks’ foreign exchange management are lifted.
Japan	Drops from 0.69 in 1983 to 0.15 in 1999	- April 1, 1983: Banks are allowed to issue bonds abroad through their subsidiaries.
		- June 6, 1983: Liberalization of short-term euro-yen lending by Japanese banks.
		- April 1, 1984; Restrictions on sales of yen-denominated securities by foreign banks are eased.
		- August 1, 1984: Japanese brokers are allowed to enter international brokerage excepting transactions between the yen and the U.S. dollar.
		- July 1, 1985: Authorization is granted to foreign banks to participate in the trust banking business in Japan, including the management of corporate pension funds.
		- April 1, 1986: The ceiling on foreign currency-denominated assets purchases by pension funds is eased.
		- August 15, 1986: A similar easing is approved for the insurance sector.
		- May 22, 1987: Certain banks and securities companies are allowed to transact financial futures abroad for their own accounts.
		- January 9, 1988: Issuance of commercial paper by nonresidents is permitted.
		- June 16, 1989: The issuance of yen-denominated bonds abroad by nonresidents is fully liberalized.
		- July 30, 1990: Foreign deposit accounts are liberalized.
		- April 26, 1991: Reporting requirements for FDI are eased.
		- January 1, 1993: Further liberalization of FDI reporting requirements. With some exceptions, foreign investors are now required to report their investments only ex post.
		- August 2, 1995: Wide-ranging measures to promote overseas investments and loans by institutional investors, including liberalization of foreign currency-denominated loans and removal of restrictions of yen-denominated external loans.
		- January 1, 1998: Limits on pension funds’ foreign exchange investments are removed.
		- April 1, 1998: The prior notice requirement for portfolio and direct investments abroad by residents is abolished.
		- April 1, 1998: The waiting period for loans extended to nonresidents is abolished.
Netherlands	Drops from 0.46 in 1985 to 0.08 in 1986	- January 1, 1986: Restrictions on capital movements are lifted.
Norway	Drops from 0.77 in 1983 to 0.23 in 1989	- June 8, 1984: Foreign banks are allowed to operate in Norway subject to the same general conditions as Norwegian banks.
		- June 15, 1984: Residents are allowed to purchase (quoted) foreign shares as well as foreign bonds.
		- May 9, 1988: Nonresidents are allowed to purchase long-term bonds denominated in Norwegian kroner.
		- June 14, 1988: Residents are allowed to incur or provide commercial and financial guarantee obligations abroad.
		- June 30, 1989: Residents are allowed to acquire shares of foreign collective investment funds without prior athorization.
		- December 8, 1989: Individuals are allowed to obtain foreign currency loans abroad subject to a license. Legal entities are allowed to engage in financial leasing in foreign currencies with Norwegian banks without prior authorization and with foreign banks with liberally granted authorization.
Portugal	Drops from 0.92 in 1985 to 0.15 in 1999	- January 1, 1986: Most capital transactions with EC residents are freed.
		- July 18, 1986: Authorization procedures for FDI are eased.

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Abstract

A New Set of Measures on Capital Account Restrictions

I. Sample and Methodology

Countries and Period Covered

Information Sources

Methodology

II. Comparison with Alternative Measures

global Trend Toward Capital Account Liberalization

Cross-Sectional Comparisons

Country-Specific Liberalization Episodes