In 2012-2018, I have served as an investigator for an IMF-funded project that seeks to code financial openness and is spearheaded by Dennis Quinn and Maria Toyoda (Suffolk). We use the IMF Annual Report on Exchange Restrictions (AREAER) volumes, which contains information about de jure financial restrictions on exchange payments (imports, invisibles, and capital) and on exchange receipts (exports, invisibles, and capital) to calculate quantitative indicators for each of 6 dimensions. The resulting indicators are on the scale of 0 (exchanges forbidden) to 2 (exchanges unrestricted). We plan to use this novel data to produce articles examining changes in financial openness across all sample countries and various political determinants of financial liberalization.
In September 2016, Dennis Quinn, Maria Toyoda, Amy Pond (Texas A&M), and I have initiated a separate IMF-funded project coding financial openness for sub-indicators of capital openness for 60 countries from 1970 to 2014. We examine the level of financial openness for inflows and outflows in portfolio investment, FDI, short-term debt securities, long-term debt securities, and financial credits. Past efforts in this field have focused only on advanced economies. Moreover, existing data sets use a binary indicator to simply measure the adoption of new restrictions, which does not allow them to differentiate between severe and frivolous restrictions.
We plan to produce 3 papers using this novel data during the next year. First, we plan to write a paper introducing the new data and describing general trends of financial regulations in 1970-2014. In the second article, we plan to look at political determinants of financial liberalization. The third paper will examine the variation in financial regulations during times of financial crises – why do some countries liberalize while others do not? Moreover, why does liberalization happen for certain financial instruments but not for others? Finally, the fourth paper will focus on building a typology of models of economic development using patterns of trade and capital liberalization observed in the data.