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With the exception of financial crisis episodes, financial openness has increased across countries in recent decades. With international agreements now cementing the relatively open capital accounts of developed economies, the focus of the debate on capital account liberalization has moved on to emerging market economies (EMEs). While capital account liberalization can be desirable in improving access to finance, recent findings indicate that capital controls may be useful in strengthening financial stability in EMEs and in securing monetary policy autonomy against volatility of international capital flows. Recent developments, policies, and the academic debate are considered in light of the gaps in our understanding of how to apply capital controls in combination with other policy instruments, as well as the uncertainty over how to liberalize the capital account while maintaining financial stability. [ABSTRACT FROM AUTHOR]

Should China continue to open its financial system? Our answer to this question is positive since financial opening is necessary for supporting economic innovation, containing financial risks and participating in international economic governance. However, the needs some new ideas in devising next-stage financial opening policies including replacing the experimental approach by more systemic method and top-level design, combining ‘using reform to assist opening’ and ‘promoting reform through opening’, and taking into full account of the spillover effects of Chinese financial policies. Finally, we make policy recommendations in seven key areas, including enforcing better policy coordination, devising macro-prudential regulations, increasing exchange rate flexibility, opening the domestic financial markets, relaxing restrictions on businesses of foreign financial institutions, improving external financing cooperation and adopting prudent cross-border capital flow management. [ABSTRACT FROM AUTHOR]

In 1989, Turkey became one of the first--and few--emerging economies to fully liberalize its capital account. Given the adverse macroeconomic conditions before the reforms, it is puzzling that Turkish policy-makers implemented policies amounting to a comprehensive and imprudent capital account liberalization. Using in-depth interviews with a significant number of key decision-makers behind capital account liberalization and employing archival material from news sources on the debates surrounding the reform process, this article examines the policy objectives and rationale behind the Turkish capital account liberalization. The main argument is that capital account liberalization represented a political rationality that put a premium on short-term expansion through funds from the rest of the world. This liberalization was a policy response to decreasing rates of economic growth and demands from organized labor and public employees for better working conditions and higher wages. Thus, this article shows that these distributional conflicts and the trajectory of economic growth were important determinants of the timing and scope of capital account liberalization in Turkey. [ABSTRACT FROM AUTHOR]

In December 1997 the International Monetary Fund (IMF) offered Korea loans to help alleviate its financial crisis. These loans were accompanied by what the IMF called “extreme structural conditionality.” Korea was required to replace its traditional East Asian economic system with a neo-liberal model. We review economic performance in the neo-liberal era. Growth has slowed, poverty and inequality have risen, and investment spending has stagnated, while foreign ownership of Korean firms and banks has skyrocketed. We argue that foreign investment has not helped Korea. For example, by leading a shift from corporate to consumer lending, foreign control of Korea's financial markets has constrained capital accumulation and helped create an excessively indebted household sector, while making it harder for the government to adopt progressive economic policies. We conclude that the 8 year experiment with radical neo-liberal restructuring has turned out well for foreign capital and wealthy Koreans, but has been a failure for the majority of Korea's people. [ABSTRACT FROM AUTHOR]