A Review of Cross-Country Experience in Capital Account Liberalisation

The paper reviews the experience of select countries - both advanced and emerging markets - in regard to capital account liberalisation (CAL). The advanced countries' experience with regard to CAL is analysed with special focus on the sequencing of CAL. The move towards CAL by many of the emerging market economies (EMEs) during the 1980s and the circumstances that led to some policy reversals and the subsequent change in the mainstream thinking during the 1990s have also been analysed. The paper also presents some of the extant capital account restrictions in select advanced countries and EMEs, emanating from security and prudential considerations that have come to be accepted as being consistent with a framework of full capital account liberalisation. Finally, the paper draws some lessons from the cross-country experience, particularly in regard to the need for sound economic policies and effective risk management strategies, prudential supervision and proper reporting standards to meet the emerging challenges of CAL.