Financial Liberalization and Domestic Policy Space: Theory and Practice with Reference to Latin America

Jan Kregel

Chapter 2 in Financial Liberalization and Economic Performance in Emerging Countries, 2008, pp 9-25 from Palgrave Macmillan

Abstract: Abstract Although they were not included in the original policy proposals of the Washington Consensus, opening domestic capital markets to foreign capital inflows and deregulation of domestic capital markets have been a crucial element of structural adjustment policies practised by Latin American developing countries and as part of the conditionality attached to IMF and World Bank lending programmes starting in the 1970s. Sup-port for these measures comes from a straightforward application of the neoclassical approach to efficient distribution of economic resources on a global level. This position still dominates the thinking of multilateral institutions, despite the fact that it is based on a faulty theoretical justification, as demonstrated by the 1960s Cambridge Controversies in the theory of capital.

Keywords: Exchange Rate; Interest Rate; Capital Inflow; Flexible Exchange Rate; Policy Space (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-22774-3_2

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DOI: 10.1057/9780230227743_2

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