ASSESSING THE IMPACT OF LIBERALIZATION OF CAPITAL MOVEMENT ON MACROECONOMIC STABILITY

Abstract

The liberalization of capital movement has been a topic of debate among policymakers and economists, with proponents arguing that it promotes economic growth and critics contending that it can lead to instability and crises. This article aims to assess the impact of capital movement liberalization on macroeconomic stability, by reviewing empirical evidence, examining specific cases, and considering the role of financial sector development. The findings suggest that the impact of liberalization is complex and depends on a country's level of economic and financial development, and that regulation and institutional quality play a critical role in mitigating risks.