From liberalizing reforms to post-global financial crisis times: how the IMF changed its view on capital account liberalization and capital controls

Das reformas liberalizantes ao pós-crise financeira global: a visão em mudança do FMI sobre liberalização da conta financeira e controles de capital

Abstract

The view of the International Monetary Fund (IMF) on capital account liberalization and capital controls has undergone important reassessments over the past two and a half decades. Several financial crises, including the 2007-2008 global financial one (GFC), propelled it to partially defend the use of capital controls to eliminate certain dysfunctions, such as financial risks and pressures on exchange rate appreciation. Our study shows that this reorientation in the scope of IMF articles also configured a response to empirical studies that pointed to flaws in orthodox theory about capital account liberalization and those that investigated the effectiveness of capital controls in emerging economies in the post-global financial crisis period. However, we are yet to find no explicit defense in favor of the use of capital controls and the permanent management of exchange rates, despite relevant empirical evidence indicating the effectiveness of these measures.

Keywords
International Monetary Fund; Capital account liberalization; Capital controls; Macroprudential policies; Financial crises