Capital Controls in Emerging Economies

By Christine Ries Hekman; Richard J. Sweeney | Go to book overview

8
A Payments Mechanism for the Independent States of the Former Soviet Union

Michael Dooley


Introduction: Economic Rationale for a Payments Mechanism

The transition to a market-oriented economy means that decentralized decisions by households and firms are organized by market forces. Because such decisions are not perfectly synchronized over time, market-determined trade in goods and services across national boundaries generates credit positions among the traders and among aggregates of traders defined by national residence. The basic requirement for an international payments system is that credits acceptable to exporters are available to importers. In a closed economy such as the former Soviet Union, residents of each republic accepted ruble-denominated liabilities of domestic banks in trade with residents of other republics. In the international context, transactions across national borders are settled with an acceptable credit instrument, for example a U.S. dollar or ECU-denominated liability of an international bank. To the extent that ruble-denominated bank liabilities are not generally accepted in interstate trade, an alternative settlement system is needed to avoid a barter system. Because residents of the former Soviet republics do not have access to international credit markets, settlement in foreign currencies would require the accumulation of a stock of international money through trade surpluses with the West.

The stock of money needed to facilitate trade depends upon the willingness of transactors to extend credit to one another. In a well-functioning

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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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