OECD Development Centre Working Papers

The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

English, French

Time-Varying Estimates on the Openness of the Capital Account in Korea and Taiwan

How open are the capital accounts in Korea and Taiwan? Has there been a trend towards more financial openness during the 1980s? This paper aims at answering both questions by estimating a model of interest determination first outlined by Edwards and Khan, in an extension suggested by Haque and Montiel. Use is made of a time-varying parameter estimation based on the Kalman filter technique, instead of the usual constant parameter estimation. The findings indicate a low degree of capital mobility for both Korea and Taiwan, and no trend towards more financial openness (except recently in Taiwan's interbank market). The dismantling of capital controls and of internal financial restrictions is thus likely to impose an important loss of monetary autonomy in both countries ...


JEL: O16: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance; E43: Macroeconomics and Monetary Economics / Money and Interest Rates / Interest Rates: Determination, Term Structure, and Effects; F36: International Economics / International Finance / Financial Aspects of Economic Integration
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