An Analysis of the Process of Capital Liberalization in Italy

Gordon Bodnar and Leonardo Bartolini

No 1992/027, IMF Working Papers from International Monetary Fund

Abstract: Beginning in 1985 Italy embarked on a path of progressive removal of its system of controls on portfolio investment, a process formally completed with the abolition of all remaining restrictions in 1990. In this paper we review this policy of capital liberalization and integrate the analysis with an examination of the process of stabilization of the lira exchange rate in the 1980s. Various indicators of capital controls’ effectiveness and target zone credibility are used to identify the temporal relations among capital liberalization, exchange rate stabilization and capital flows.

Keywords: WP; exchange rate; net capital; forward market; capital liberalization; interest rate differential; exchange rate expectation; capital mobility; liberalization of capital movement; capital control premium; Capital controls; Exchange rates; Capital flows; Capital inflows; Exchange rate stability (search for similar items in EconPapers)
Pages: 38
Date: 1992-04-01
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Citations: View citations in EconPapers (3)

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