Ilan Noy
University of Hawaii at Manoa

Abstract

The International Monetary Fund has been blamed for precipitating financial crises by pressuring countries to liberalize their capital accounts prematurely. In this paper, we empirically evaluate this claim. Using a panel data of developing economies from the 1983-98 period, we examine whether the changes in the regime governing capital flows took place in response to the conditionality associated with IMF programs. We find evidence that IMF programs are correlated with capital account liberalization episodes. This effect is found to have been especially strong during the 1990s. We also find that decontrol was more likely to take place within the context of the IMF's long-term concessionary programs during non-crisis periods. We also find that liberalization took place during periods of internal and external balance.

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