Suchergebnisse

For capital market liberalization in developing countries, the returns have been difficult to identify: there is no convincing empirical evidence linking open capital markets to economic growth. There is however, considerable evidence of increased risk. Capital market liberalization increases consumption volatility and heightens countries' vulnerability to crises. The poor are least equipped to cope with increased volatility, and they are most affected by financial crises. Capital mobility reduces their bargaining power relative to capital and leads to a decline in the labor share of output. Financial openness delivers the poor few benefits in terms of increased access to credit and other financial services, and it constrains governments' redistributive efforts and anti-poverty fiscal policies. While it is difficult to establish a conclusive direct link between capital market liberalization and increased rates of poverty, the evidence presented in this paper suggests a compelling case that capital market liberalization is bad for the poor in developing countries.

Research has typically addressed capital account liberalisation in terms of its growth effects. While no systematic growth benefits have been identified, potentially damaging poverty and inequality impacts have been overlooked. This paper identifies a number of channels through which these may occur. For policymakers, these are: increased instability of government finances, restricted policy freedom through "market discipline" and the direct costs of managing inflows. Financial market and industrial structure effects include: greater volatility in access to finance for households and small businesses, increasing industrial concentration and shifts in taxation away from capital and towards labour and consumption. The paper makes a number of suggestions to address these potential dangers of liberalisation. These include measures to encourage the taking of longer-term positions in developing country markets by institutional investors in richer countries, and support for reserve requirements on capital inflows. The paper finally argues that requirements for equal treatment of investors (in WTO negotiations or elsewhere) should be resisted, where this is likely to prevent policymakers taking a selective approach to foreign direct investment.