TY  - JOUR
AU  - Edwards,Sebastian
TI  - The Order of Liberalization of the Current and Capital Accounts of the Balance of Payments
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1507
PY  - 1987
Y2  - November 1987
UR  - http://www.nber.org/papers/w1507
L1  - http://www.nber.org/papers/w1507.pdf
N1  - Author contact info:
Sebastian Edwards
UCLA Anderson Graduate School of Business
110 Westwood Plaza, Suite C508
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-6797
Fax: 310/206-5825
E-Mail: sebastian.edwards@anderson.ucla.edu
AB  - The opening up of an economy to the rest of the world has generally been considered an integral part of economic reform aimed at increasing the role of markets. Until recently, however, very little discussion was devoted to the order in which the capital and current account should be liberalized indeveloping countries.This paper deals with several aspects of the order of liberalization. The different arguments usually given to advocate a particular ordering are critically reviewed. Then a three-good two-factor model is used to analyze the effects of alternative ordering on production and income distribution. A two-period model of a small economy is also used to investigate the welfare effects of opening the capital account in the presence of distortions. While the discussion does not yield a theorem regarding the appropriate order of liberalization, there are strong presumptions that it is more prudent to liberalize the current account first.
ER  -