We thank Adam Honig, Michael Hutchison, Hiro Ito and Abdul de Guia Abiad for sharing their data, and audiences at the Bank of Korea, Korea University, the University of Hawaii, the Santa Cruz Center for International Economics (SCCIE), the ASSA meeting in Boston, and particularly our discussants Michael Dooley and Eric Bond. Noy wishes to thank the East West Center for financial support.
The IMF and the Liberalization of Capital Flows
Version of Record online: 3 MAR 2008
© 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd
Review of International Economics
Volume 16, Issue 3, pages 413–430, August 2008
How to Cite
Joyce, J. P. and Noy, I. (2008), The IMF and the Liberalization of Capital Flows. Review of International Economics, 16: 413–430. doi: 10.1111/j.1467-9396.2007.00711.x
- Issue online: 8 JUL 2008
- Version of Record online: 3 MAR 2008
We evaluate the claim that the International Monetary Fund precipitated financial crises during the 1990s, by pressuring countries to liberalize their capital accounts prematurely. Using data from a panel of developing economies from 1982–98, we examine whether the changes in the regime governing capital flows took place during participation in IMF programs. We find evidence that IMF program participation is correlated with capital account liberalization episodes during the 1990s. We verify the robustness of our results using alternative indicators of capital account openness. To determine whether decontrol was premature, we compare the economic and financial characteristics of countries that decontrolled during IMF programs with those of countries who did so independently, and find some evidence of IMF-led premature liberalizations.