Most countries emerged from the Second World War with capital accounts that were closed to the rest of the world. Since then, a process of capital account opening has occurred, with the result that all developed and many emerging-market countries now have capital accounts that are both de facto and de jure open, while many developing countries also have de facto openness. This study examines this in part by considering some of the first lessons from the current global financial crisis. This crisis may change the terms of the debate on capital account liberalization in a deeper and more lasting way than any of the crises of the past two decades because it may mark a reversal in the secular trend of financial liberalization at the core of the international financial system. The current crisis also raises new questions about the appropriate policy responses to boom-bust dynamics in domestic credit and in international credit flows. Intellectual consistency is needed between the domestic and international dimensions of financial regulation and the policies aimed at dealing with boom-bust dynamics in domestic and international credit.
Olivier Jeanne joined the Peterson Institute for International Economics as a senior fellow in 2008. He is a professor of economics at the Johns Hopkins University and has taught at UC Berkeley (1997) and at Princeton University (2005–06). From 1998 to 2008 he held various positions in the Research Department of the International Monetary Fund.
Arvind Subramanian is the Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics and senior fellow at the Center for Global Development. His book Eclipse: Living in the Shadow of China's Economic Dominance was published in September 2011, and he is coauthor of Who Needs to Open the Capital Account? (2012). Foreign Policy magazine has named him as one of the world's top 100 global thinkers in 2011. He was assistant director in the Research Department of the International Monetary Fund. He served at the GATT (1988–92) during the Uruguay Round of trade negotiations and taught at Harvard University's Kennedy School of Government (1999–2000) and at Johns Hopkins' School for Advanced International Studies (2008–10).
John Williamson, senior fellow (retired), was associated with the Institute from 1981 to 2012. He was project director for the UN High-Level Panel on Financing for Development in 2001; on leave as chief economist for South Asia at the World Bank during 1996–99; economics professor at Pontifica Universidade Católica do Rio de Janeiro (1978–81), University of Warwick (1970–77), Massachusetts Institute of Technology (1967, 1980), University of York (1963–68), and Princeton University (1962–63); adviser to the International Monetary Fund (1972–74); and economic consultant to the UK Treasury (1968–70).