Please use this identifier to cite or link to this item: https://ir.iimcal.ac.in:8443/jspui/handle/123456789/955
Title: Capital-market liberalization is certainly no paragon of virtues: A theoretical review
Authors: Chandra, Parag
Chakraborty Saptorshee, Kanto
Keywords: Capital market- liberalization
Contagion
Convex technologies
Financial crisis
Financial integration
Risk sharing
Issue Date: 2014
Publisher: SCOPUS
Indian Journal of Finance
Associated Management Consultants Pvt. Ltd.
Series/Report no.: 8(8)
Abstract: The theory of capital market liberalization is based on two central assumptions- convex technologies and concave preference functions faced by agents. Standard models employed by the economists of the International Monetary Fund (which we simply call the Fund) justifiably reveal that more the financial market is globally integrated, the better are the risks dispersed, based on the above mentioned assumptions. So, the Fund's economists deliberately claim that full capital market liberalization helps cross-country smoothing of any adverse shock. However, ironically, the above-mentioned proposition is true when capital flows are counter cyclical. In reality, capital flows pro-cyclically because of the credit market imperfections, giving rise to a natural set of non-convexities. In this paper, we have made a modest attempt to review why capital market liberalization leads to economic instability instead of accelerating economic growth.
Description: Chandra, Parag, Krishnagar Government College, Krishnagar, Nadia, West Bengal, 741101, India; Chakraborty Saptorshee, Kanto, Indian Institute of Management Calcutta (IIMC), Diamond Harbour Road, Joka, Kolkata, West Bengal, 700 104, India
ISSN/ISBN - 09738711
pp.27-43
DOI - 10.17010/ijf/2014/v8i8/71854
URI: https://www.scopus.com/inward/record.uri?eid=2-s2.0-84919674406&doi=10.17010%2fijf%2f2014%2fv8i8%2f71854&partnerID=40&md5=c41e4f32554fab1e58dd93cb4bc1365e
https://ir.iimcal.ac.in:8443/jspui/handle/123456789/955
Appears in Collections:Finance and Control

Files in This Item:
There are no files associated with this item.


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.