SHOULD LIBERALIZATION OF FINANCIAL MARKETS BE PRACTICED?

There were many discussions regarding the benefits and detrimental consequences of financial liberalizations, however the issue is still subject to continuous debates and no ultimate solution have been reached at. The main issue of the debate is that there are significant positive effects of international capital surges into developing economies, but negative consequences can quickly overshadow these benefits if short-term inflows are allowed to reach unsustainable levels. The potential costs, and possible solutions to such …

…emerging economies prove to the market their reliability and responsibility, they should reach a point where they can reap the benefits of freely flowing capital, without reliance on capital controls and without fear of financial collapse. Seeking the benefits of financial integration while suffering fewer costs is a difficult task, the terms of the trade-off between higher incomes (because of broadened economic opportunities) and higher risk (because of exposure to financial hazards) can be improved.