CAPITAL ACCOUNT REGIMES AND THE DEVELOPING COUNTRIES

Transcription

1 CAPITAL ACCOUNT REGIMES AND THE DEVELOPING COUNTRIES

2 Also by G. K. Helleiner AGRICULTURAL PLANNING IN EAST AFRICA (editor) A WORLD DNIDED (editor) FOR GOOD OR EVIL (editor) FROM ADJUSTMENT TO DEVELOPMENT IN AFRICA (editor with Giovanni Andrea Cornia) MANUFACTURING FOR EXPORT IN THE DEVELOPING WORLD (editor) PEASANT AGRICULTURE, GOVERNMENT AND ECONOMIC GROWTH IN NIGERIA POVERTY, PROSPERITY AND THE WORLD ECONOMY (editor with S. Abrahamian, E. Bacha, R. Lawrence and P. Malan) THE IMF AND AFRICA (editor) INTERNATIONAL ECONOMIC DISORDER THE INTERNATIONAL MONETARY AND FINANCIAL SYSTEM (editor) INTERNATIONAL TRADE AND ECONOMIC DEVELOPMENT INTRA-FIRM TRADE AND THE DEVELOPING COUNTRIES THE NEW GLOBAL ECONOMY AND THE DEVELOPING COUNTRIES THE OTHER SIDE OF INTERNATIONAL DEVELOPMENT POLICY (editor) TRADE POLICY AND INDUSTRIALIZATION IN TURBULENT TIMES (editor) TRADE POLICY, INDUSTRIALIZATION AND DEVELOPMENT (editor)

3 Capital Account Regintes and the Developing Countries Edited by G. K. Helleiner Professor of Economics University of Toronto Canada ~ in association with ~ PALGRAVE MACMILLAN

4 Frrst published in Great Britain 1998 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN ISBN (ebook) DOI / Frrst published in the United States of America 1998 by ST. MARTIN'S PRESS, INC., Scholarly and Reference Division, 175 Fifth Avenue, New York, N.Y ISBN Library of Congress Cataloging-in-Publication Data Capital account regimes and the developing countries I edited by G. K. Helleiner. p. em. Most of the chapters were papers originally published in International monetary and financial issues for the 1990s, v. 7 and 8 by the United Nations. Includes bibliographical references and index. ISBN (cloth) 1. Capital movements-developing countries. 2. International finance. 3. Finance-Developing countries. 4. Monetary policy -Developing countries. 5. Developing countries-foreign economic relations. I. Helleiner, Gerald K. II. International monetary and financial issues for the 1990s. HG5993.C '.042~c United Nations Conference on Trade and Development 1998 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WlP 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources

5 Contents List of Figures List of Tables Notes on the Contributors Preface List of Abbreviations vt vii ix xi xii 1 Capital Account Regimes and the Developing Countries: Issues and Approaches 1 G. K. Helleiner 2 Capital Account Regulations and Macroeconomic Policy: Two Latin American Experiences 45 Guillermo Le Fort-V. and Carlos Budnevich L. 3 Managing Foreign Capital Flows: The Experiences of the Republic of Korea, Thailand, Malaysia and Indonesia 82 Yung Chul Park and Chi-Young Song 4 Capital Inflows and Macroeconomic Policy in Sub-Saharan Africa 141 Louis Kilsekende, Damoni Kitabire and Matthew Martin 5 A New Facility for the IMF? 184 John Williamson 6 Cross-Border Payments Taxes and Alternative Capital Account Regimes 196 Rudi Dornbusch 7 Issues Relating to the Treatment of Capital Movements in the IMF 211 Aziz Ali Mohammed Appendices 220 Index 223 v

6 List of Figures 3.1 Trends of investment and savings, selected Asian countries, Trend and composition of foreign capital inflows, selected Asian countries, Rate of change in the consumer price index and rate of real effective currency devaluation, selected Asian countries, and Republic of Korea: changes in net domestic assets and net foreign assets, Interest rates in Thailand and the United States, quarterly, Interest rates in Malaysia and the United States, quarterly, Indonesia: net sales of SBI and SBPU, and the SBI discount rate, Interest rates in Indonesia and the United States, monthly, A1 GARCH variance of weekly exchange rates, A2 GARCH variance of weekly stock returns, A3 GARCH variance of interest rates, 1985/9 to vi

7 List of Tables 1.1 Developing countries: capital flows, Percentage composition of external long-term capital flows to developing countries, Major types of private capital inflow to selected developing countries, Capital controls in developing countries, Developing countries that have accepted IMF Article VIII obligations, Chile and Colombia: balance of payments, Chile and Colombia: capital account balance and foreign direct investment, Chile and Colombia: time structure of non-investment capital flows, Chile and Colombia: macroeconomic indicators, Chile and Colombia: savings and investment, A1 Colombia: maturity of FFCT and reserve requirement ratio, according to Central Bank Resolution 22 of Republic of Korea: economic indicators, Thailand: economic indicators, Malaysia: economic indicators, Chronology of administrative measures to contain capital inflows in Malaysia in Indonesia: economic indicators, Capital flows to developing countries and sub-saharan Mrica, Composition of private capital inflows to developing regions, and Capital flows to selected countries in sub-saharan Africa, and Private capital flows to selected countries in sub-saharan Mrica, and Composition of private capital inflows to sub-saharan Mrica, and Composition of capital flows to sub-saharan Africa, by country, and vii

8 viii List of Tables 4.7 Real lending rates in selected countries of sub-saharan Africa, Nominal and real exchange rates of selected countries in sub-saharan Africa, External reserves of selected countries in sub-saharan Africa, Selected countries in sub-saharan Africa: macroeconomic indicators, and Net capital inflows to developing countries 197

9 Notes on the Contributors Carlos Budnevich L. is Manager of Financial Analysis, Banco Central de Chile. He has been Professor of Economics at Universidad Cat61ica de Chile and Universidad de Chile, and has held positions as an Economist at Corporaci6n de Investigaciones Econ6micas para Latinoamerica (CIEPLAN) and the Superintendencia de Bancos. He holds a PhD in Economics from the University of Pennsylvania. Rudi Dornbusch is Ford Professor of Economics and International Management at the Massachusetts Institute of Technology G. K. Helleiner is Professor of Economics at the University of Thronto and Research Coordinator for the Intergovernmental Group of Twenty-Four on International Monetary Affairs (G-24). Louis Austin Kasekende is Executive Director, Research and Policy Function, at the Bank of Uganda. Damoni Kitabire is Acting Director of Budget, Ministry of Finance, Republic of Uganda. Guillermo R. Le Fort-V. is Head of the International Division of the Central Bank of Chile, and a member of the Governor's advisory team in macroeconomic and fmancial policy matters. Formerly he was a Senior Economist at the International Monetary Fund (IMP) and Assistant Professor of Economics at the University of Chile. He holds a PhD in Economics from the University of California at Los Angeles. Matthew Martin is Director of External Finance for Africa, (EPA), an economic policy research, advisory and capacity-building organization funded by multilateral and bilateral donors. EPA specializes in national debt reduction strategies, and external and domestic financing of development, and is currently working with over twenty African and non-african governments. Aziz Ali Mohammed was the head of the G-24 Liaison Office in Washington when this paper was written. Previously he was Chairman ix

10 X Notes on the Contributors of the G-24 Deputies and Special Advisor to the Governor of the State Bank of Pakistan, after a distinguished career in the International Monetary Fund. Yung Chul Park is Professor of Economics at Korea University, and the President of the Korea Institute of Finance. He previously served as the chief economic adviser to former President Doo Hwan Chun, and as President of the Korea Development Institute. Chi-Young Song is Assistant Professor in the Division of Economics, Kookmin University, Seoul, Korea. At the time of writing he was a Research Fellow at the Korea Institute of Finance. He received his PhD from Brown University. John Williamson was Senior Fellow at the Institute for International Economics in Washington, DC, when this paper was written. He is currently on leave from the Institute and serving as Chief Economist for South Asia in the World Bank.

11 Preface The first six chapters in this volume were papers originally prepared, under contract with the United Nations Conference on Thade and Development (UNCfAD), as part of the Research Programme of the Intergovernmental Group of 'IWenty-Four (G-24), the developing-country caucus within the International Monetary Fund (IMP) and World Bank. The G-24 Research Programme is financed by the International Development Research Centre (IDRC) of Canada and the governments of Denmark and The Netherlands as well as the G-24 countries themselves. In 1994, the IDRC made a special grant to the G-24 Research Programme to enable it to explore issues arising in the capital account of the developing countries, and all of these papers were thereby made possible. The papers were originally published in the G-24 research series, International Monetary and Financial Issues for the 1990s, volumes VII and VIII (United Nations, New York and Geneva, 1996 and 1997). The seventh paper was prepared for the G-24 as a 'position paper' in the run-up to the 1997 annual meetings of the IMR The Group of Twenty-Four is most grateful to the IDRC for its support of this project. I should also like to thank Detlef Kotte of UNCfAD for his editorial work in the preparation of these papers for publication and Barbara Tiede at the University of Toronto for her assistance in the preparation of the fmal manuscript. G. K. HEUEINER xi

12 List of Abbreviations ADR ALADI BIBF BIS CFA CPI EC EEF FDI FEMA FFCT G-7 G-10 G-24 GAB GATS GATT GDI GDP IMF IOSCO LIBOR MAl MSBs NAFTA NDA NFA NIEs ODA OECD OFI RBZ SBI SBPU SDR SET American Depository Receipts Association for Latin American Integration Bangkok International Banking Facilities Bank for International Settlements Communaute Financiere d' Afrique Consumer price index exchange certificates Exchange Equalization Fund Foreign Direct Investment Foreign Exchange Management Act Financial Foreign Currency Title Group of Seven Group often Group of Twenty-Four General Arrangements to Borrow (of IMF) General Agreement on Trade in Services General Agreement on Tariffs and Trade gross domestic investment gross domestic product International Monetary Fund International Organization of Securities Commissions London Inter-Bank Offer Rate Multilateral Agreement on Investment monetary stabilization bonds North American Free Trade Agreement net domestic assets net foreign assets newly industrializing economies Official Development Assistance Organization for Economic Cooperation and Development other foreign investment Reserve Bank of Zimbabwe Sertiftkat Bank Indonesia Sural Berhaga Pasar U ang special drawing right Stock Exchange of Thailand xii

13 List of Abbreviations xiii SSA TNC UNCfAD VDR WTO sub-saharan Africa transnational corporation United Nations Conference on Trade and Development variable deposit requirements World Trade Organization