Kiel Working Papers, Kiel Institute for World Economics
No 1029:
Liberalization and Regulation of International Capital Flows: Where the Opposites Meet
Peter Nunnenkamp
Abstract: The paper discusses the pros and cons of capital account
liberalization. Rather than contrasting liberalization and regulation of
capital flows as irreconcilable antagonisms, we argue that capital account
liberalization requires institutional and regulatory safeguards. Even
though the effectiveness of specific capital controls cannot be taken for
granted, we reject the view that financial globalization has deprived
national policymakers of the means to protect their economies against
crisis. In addition to national safeguards, we assess the chances for
crisis prevention and resolution on the regional level and present options
to overcome institutional deficits on the global level. We conclude that
reforms of the international financial architecture can help prevent
illiquidity and ensure a fair burden sharing in the case of insolvency,
without aggravating moral hazard behavior of the parties involved.
Keywords: Capital account liberalization, financial crises, financial regulation, international financial architecture.; (follow links to similar papers)
JEL-Codes: F30; G18; (follow links to similar papers)
32 pages, March 2001
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