There are benefits to currency sovereignty, defined as a floating exchange rate currency issued by a sovereign government. When Argentina abandoned its currency board, it gained policy independence:...
Capital Account Convertibility
A strong financial sector is required if a nation is to reap the potential gains from trade in assets. In the financial markets, the collapse of a few institutions could lead to a collapse of the...
In Poland, after significant external liberalisation from 1995, the resultant huge capital inflows began to impair economic growth. Appreciation of the domestic currency damaged international...
The early 1990s currency board experiment in Argentina tamed inflation, but it eventually had other disastrous consequences. The pursuit of orthodox policies meant that within a decade the economy...
Optimistic expectations about capital account liberalisation have not been borne out in reality in Mexico. There have been negative outcomes in a number of areas - overvaluation of the currency,...
The proponents of free capital movement claim that one advantage is the supervision of economic policies by the financial market in the direction of "prudent" policies. The Brazilian case shows...
There is little doubt that moving towards a more open capital account would benefit the country enormously. The domestic foreign exchange market is providing a leading edge in the move to...
The majority of practitioners support the measured pace with which the capital account has been opened up in India and would, at best, counsel a moderate acceleration. However, they would argue for a...
Determination of fuller capital account convertibility is not based on the contemporary thinking of economists. It is essentially led by policy-makers' preferences and judgments.
This article presents a brief summary of theoretical analysis and empirical evidence, suggesting that it is unwise to embark on further capital account liberalisation. India may miraculously avoid...
At this stage, full capital account liberalisation promises no large benefits while it increases the risk of things going badly wrong. Variations in the flow of short-term capital, like bank loans,...
