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- Title
Liberalization of Capital Movements and of the Domestic Financial System.
- Authors
Bacchetta, Philippe
- Abstract
This paper analyses the dynamic impact of a joint liberalization of capital movements and of the domestic financial sector. Both a simultaneous and a sequential liberalization are examined in an overlapping-generations model with a q-theory of investment. A liberalization generally leads to an initial period of capital inflows followed by capital outflows. It also increases investment and causes an overshooting in share prices. Furthermore, the interest rate level before a liberalization will usually not indicate the direction of net capital flows.
- Subjects
CAPITAL movements; FINANCIAL institutions; STOCK prices; BALANCE of payments deficit; ECONOMIC indicators; MONETARY policy
- Publication
Economica, 1992, Vol 59, Issue 236, p465
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2554891