How Risky is Financial Liberalization in the Developing Countries?

Charles Wyplosz

No 2724, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper looks at the effect of domestic and external financial liberalization. Using a sample of 27 developing and developed countries, it studies the exchange market pressure and output gap effects of liberalization. The results show that developing and developed countries differ in many respects. By and large, the effects are significantly stronger in developing countries. Exchange market pressure to be strongly positive as capital flows, but reversals seem to follow systematically. Similarly, the behaviour of the output gap corresponds well to boom and bust cycles. The Paper concludes with a discussion of policy measures desirable to make liberalization safer than it has been so far.

Keywords: Currency crises; Liberalization; Sequencing (search for similar items in EconPapers)
JEL-codes: E40 F30 F40 G20 O10 (search for similar items in EconPapers)
Date: 2001-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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