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Capital Market Liberalization and Development$
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José Antonio Ocampo and Joseph E. Stiglitz

Print publication date: 2008

Print ISBN-13: 9780199230587

Published to Oxford Scholarship Online: May 2008

DOI: 10.1093/acprof:oso/9780199230587.001.0001

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Capital Market Liberalization, Globalization, and the IMF

Capital Market Liberalization, Globalization, and the IMF

(p.76) 3 Capital Market Liberalization, Globalization, and the IMF
Capital Market Liberalization and Development

Joseph E. Stiglitz (Contributor Webpage)

Oxford University Press

Capital market liberalization, especially the rules governing short-term cross-border capital flows, is one of the most controversial aspects of globalization. The IMF and the US Treasury have tried to push capital market liberalization around the world, encountering enormous opposition from developing countries as well as from economists who are less enamored with the tenets of market fundamentalism. Taking as its point of departure a recent IMF paper this chapter explains why capital market liberalization has so often led not to economic growth but to increased economic instability, and provides insights into how the IMF could have gone so wrong in its advocacy of capital market liberalization. It recommends that in the future, the IMF should rely more on evidence and less on ideology in developing its policy agenda. It should stop pressuring countries to liberalize and instead address underlying CM failures, working with countries to design interventions that stabilize capital flows and shift risks to developed countries and international financial institutions.

Keywords:   capital market liberalization, IMF, financial crises, macroeconomic stability, capital controls, foreign direct investment

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