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IMF Conditionality and Capital Controls: Capital Account Liberalization to Capital Inflow Management?

Author

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  • Makram El-Shagi

    (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan)

  • Steven Yamarik

    (California State University Long Beach, US)

Abstract

Since the end of the Bretton Woods system, promoting capital account liberalization has been one of the tenants of the IMF. Capital account liberalization was deemed one of the 10 pillars of what was often dubbed the “Washington Consensus.” Yet, things changed drastically with the Global Financial Crisis of 2008. From 2009 to 2012, comments from top IMF officials and staff reports displayed quite clearly that the IMF had revised its position where capital controls could be part of the toolkit. In this paper, we assess the role of the IMF in capital account liberalization from 1995 to 2015. We use a midpoint‐inflated ordered probit model to estimate the effects of being under IMF conditionality on capital controls, allowing for different effects for pre‐ and post‐Financial Crisis. We find that the IMF did indeed drive liberalization of capital inflows in the precrisis era, but stopped doing so in the postcrisis period.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Makram El-Shagi & Steven Yamarik, 2018. "IMF Conditionality and Capital Controls: Capital Account Liberalization to Capital Inflow Management?," CFDS Discussion Paper Series 2018/6, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    • Handle: RePEc:fds:dpaper:201806
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    References listed on IDEAS

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    1. Ablam Estel Apeti & Kwamivi Mawuli Gomado, 2024. "International monetary fund conditionality and structural reforms: Evidence from developing countries," Post-Print hal-04723871, HAL.

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    More about this item

    Keywords

    capital controls; IMF conditionality; global financial crisis;
    All these keywords.

    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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