Capital Controls in Emerging Economies

By Christine Ries Hekman; Richard J. Sweeney | Go to book overview
Ownership and management of companies that get less competitive overtime, as their "short-term" orientation brings them sooner to the "mature" phase of an industry and company life cycle
Less ownership of and investment in newer technologies and activities that are the future of the global economy
Employment opportunities with higher compensation and greater potential for growth will be in firms that are owned and managed by foreigners.

The political implications of these biases are clear. Only the severity, extent and consequences of discontent is in question.

In recent times, we have seen strong evidence that national polity is increasingly aware of conditions of prosperity and personal freedom in other countries, especially countries deemed to be "in competition." The polity is more likely to regard as competitors countries that are closer geographically and more alike in terms of basic resources, history and culture. It is increasingly likely that national governments will be held responsible for policies that obstruct their citizens in their search for prosperity and personal freedom, especially if the conditions and results in "competing" countries are more successful.

Forecasts of specific political responses to the conditions listed above require use of models of political economy and public choice. The important contributions of the analysis presented here are that national opportunities for prosperity, growth, and competitiveness will be compromised by the imposition of capital controls. Coming at a time when basic structures and patterns are being established, these impediments will not be easily reversed. Further, ownership patterns and operating choices within the countries will reflect a seeming preference for foreigners and disadvantage for nationals that will seem to arise from both the private enterprise system in general and from public policy choices in particular. It is not too great a stretch to imagine the impact on national perceptions of fairness in a democratic system.


Notes

I am grateful to Dick Sweeney and Tom Willett for helpful discussions. These ideas were initially presented at conferences sponsored by Georgetown University and Tallinn Technical University and discussion at these meetings was helpful. Any errors remain my own.

1.
Guitián, Chapter 2, p. 20, this volume.
2.
For a cogent discussion of the role of institutional factors in national growth, prosperity and comparative advantage, see Olson ( 1996).
3.
Sweeney, Chapter 4, pp. 47-49, this volume.
4.
This valuation formulation assumes a discount rate, COC, that is constant across periods.

-108-

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Capital Controls in Emerging Economies
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Preface ix
  • Acknowledgments xi
  • Introduction and Overview 1
  • Notes 12
  • 1 - Orthodoxy is Right: Liberalize The Capital Account Last 13
  • Notes 16
  • 2 - Reality and the Logic Of Capital Flow Liberalization 17
  • Introduction 17
  • Notes 29
  • 3 - Preconditions for Liberalization Of Capital Flows: a Review And Interpretation 33
  • Introduction 33
  • Notes 43
  • 4 - The Information Costs Of Capital Controls 45
  • Introduction 45
  • Conclusions 54
  • References 55
  • 5 - Currency Convertibility, Policy Credibility and Capital Flight In Poland and the Czech and Slovak Federal Republic 63
  • Introduction 63
  • Notes 83
  • References 85
  • 6 - Capital Controls and Corporate Investment Behavior 89
  • Introduction 89
  • Notes 108
  • References 108
  • 7 - Capital Account Liberalization and Policy Incentives: an Endogenous Policy View 111
  • Introduction 111
  • Notes 131
  • 8 - A Payments Mechanism For The Independent States Of The Former Soviet Union 137
  • Introduction: Economic Rationale For a Payments Mechanism 137
  • References 157
  • About the Editors and Contributors 159
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