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Financial Reform and Capital Flows in a Developing Economy (Réforme financière et flux de capitaux dans une économie en développement) (La reforma financiera y los flujos de capital en una economía en desarrollo)

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  • Donald J. Mathieson

    (International Monetary Fund)

Abstract

Several developing countries have found that a combination of exchange rate and financial reform can result in capital inflows that make it difficult, if not impossible, for the authorities to control the growth of monetary aggregates. This paper examines how financial reform can be integrated with exchange rate and monetary policy so as to allow the authorities to limit the size of any capital inflow and achieve their policy objectives. When authorities are attempting to achieve a set of growth and inflation objectives, it is shown that capital inflows will be manageable under a patient, anti-inflation policy but may become overwhelming under an impatient, growth-oriented policy. The optimal policy mix under a patient, anti-inflation program will involve an initial phase with moderate, discrete increases in domestic nominal interest rates and an overdepreciation of the exchange rate followed by a second phase involving gradual declines in nominal interest rates and an appreciation of the exchange rate. This program will yield an adjustment process that is superior to those generated either in the absence of capital flows or in the presence of capital controls. The results of the study are used to examine why Korea experienced large capital inflows in the 1960s. /// Plusieurs pays en développement se sont aperçus qu'une politique de change conjuguée à une réforme financière pouvait entrainer des entrées de capitaux qui rendent difficile, sinon impossible, la maitrise, par les autorités, de la croissance des agrégats monétaires. La présente étude examine comment une réforme financière peut étre intégrée à une politique de change et à une politique monétaire de façon à permettre aux autorités de limiter l'ampleur des entrées de capitaux et d'atteindre leurs objectifs de politique. Lorsque les autorités s'efforcent de réaliser un ensemble d'objectifs en matière de croissance et d'inflation, il apparaít que les entrées de capitaux peuvent être contrôlées par le biais d'une politique anti-inflationniste patiente, alors qu'elles demeurent impossibles à maitriser dans le cadre d'une politique impatiente orientée vers la croissance. Le dosage optimal de mesures dans le cadre d'un programme anti-inflationniste où la patience est de règle comprendra une phase initiale d'augmentations modérées et discrètes des taux d'intérét nominaux intérieurs et de surdépréciation du taux de change, suivie d'une seconde phase marquée par une baisse progressive des taux d'intérét nominaux et une appréciation du taux de change. Ce programme engendrera un processus d'ajustement plus efficace que ceux qui se produisent en l'absence de flux de capitaux ou lorsque ces derniers sont contrólés. On s'est servi des résultats de la présente étude pour expliquer pourquoi la Corée a reçu d'importantes entrées de capitaux au cours des années 1960. /// A juzgar por la experiencia de varios países en desarrollo, a las autoridades les puede resultar difícil, si no imposible, regular el crecimiento de los agregados monetarios cuando se producen entradas de capital a consecuencia de una combinación de reformas cambiaria y financiera. En el estudio se demuestra que cuando las autoridades se proponen lograr un conjunto de objetivos de crecimiento e inflación, la afluencia de capital es controlable si se pone en práctica una política antiinflacionaria perseverante, pero puede llegar a ser abrumadora cuando se sigue con impaciencia una política de crecimiento. La combinación óptima de políticas, conforme a un programa antiinflacionario tesonero, entrañará una fase inicial de aumentos moderados y discretos del tipo de interés nominal interno y una sobredepreciación del tipo de cambio, seguida de una segunda fase que incluirá la reducción gradual de los tipos de interés nominal interno y una sobredepreciación del tipo de cambio, seguida de una segunda fase que incluirá la reducción gradual de los tipos de interés nominales y la apreciación del tipo de cambio. Con este programa se puede llegar a un proceso de ajuste que es superior a los que se producen o bien en ausencia de flujos de capital o cuando se aplican controles de capital. Los resultados obtenidos en el estudio se han utilizado para examinar la razón por la cual se registraron grandes entradas de capital en Corea en los años sesenta.

Suggested Citation

  • Donald J. Mathieson, 1979. "Financial Reform and Capital Flows in a Developing Economy (Réforme financière et flux de capitaux dans une économie en développement) (La reforma financiera y los flujos de capital en una economÃ," IMF Staff Papers, Palgrave Macmillan, vol. 26(3), pages 450-489, September.
  • Handle: RePEc:pal:imfstp:v:26:y:1979:i:3:p:450-489
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    Cited by:

    1. Bulent Guloglu, 2003. "Financial Liberalisation and Economic Growth: A Panel Data Approach," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 7(27), pages 35-58.
    2. Pinar Evrim Mandaci, 2003. "Abnormal Return Fluctuations in the ISE (Istanbul Stock Exchange) Before and After the General Elections in Turkey," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 7(27), pages 1-14.
    3. Amaira Bouzid, 2012. "McKinnon’s Complementarity Hypothesis: Empirical Evidence for the Arab Maghrebean Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(44), pages 23-36, June.
    4. M.Mete Doganay, 2003. "Forecasting the Volatilities and Covariances of ISE Government Debt Securities Indices," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 7(27), pages 15-34.

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