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CAPITAL FLOWS, CAPITAL ACCOUNT LIBERALISATION AND THE MEDITERRANEAN COUNTRIES

                                                                 Heather D. Gibson
                                                                   Bank of Greece

                                                                 Nicholas T. Tsaveas
                                                                   Bank of Greece

                                                                Thomas Vlassopoulos
                                                                    Bank of Greece

ABSTRACT

This paper examines questions related to possible capital account liberalisation in the Mediterranean countries. First, we provide an overview of the extent to which these countries have capital controls along with their exchange rate regimes and some basic macroeconomic aggregates. Second, we examine the case for capital account liberalisation, along with the prerequisites for successful liberalisation. Here we consider issues such as sequencing and possible benefits of synchronisation. Finally, we examine the experience with capital flows – both FDI and other capital flows. We explain these flows and use the past experience of these countries to draw some conclusions for the successful opening up of the capital account.

Keywords: capital account liberalisation, Mediterranean countries, capital flows

JEL classification: F32, F21, F36

Acknowledgements
We would like to thank Anna Capetanaki, a summer intern at the Bank of Greece, for her excellent research assistance during this project. The paper has also benefited from comments from participants at the ECB Workshop on Economic and Financial Developments in Mediterranean Countries (Frankfurt, 21/22 September 2005) including our discussants, George Syrichas and Bernhard Gauci. Finally we would like to thank Cristina Vespro who took the time to read the paper and provide many helpful remarks. The views expressed in this paper are those of the authors and do not necessary reflect those of the Bank of Greece.

Correspondence:

Heather D. Gibson,
Economic Research Department,
Bank of Greece, 21, E. Venizelos Ave.
102 50 Athens, Greece
Tel: +30-210-3202415, Fax: +30-210-3233025
E-mail: hgibson@bankofgreece.gr


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