The Theoretical Link Between Capital Account Liberalization and Currency Crisis Episodes

The paper investigates theoretical background if countries with unregulated capital flows are more vulnerable to currency crises. In order to solve this question properly the paper considers sequence, precondition of the Capital Account Liberalization process and different generation of currency crisis models. Furthermore, theoretical studies pointed that the speed and sequence of the CAL process needs to be adequate for the country financial development and financial liberalization. This paper was presented May 22, 2008, at the 18th International Conference of the International Trade and Finance Association meeting at Universidade Nova de Lisboa in Lisbon, Portugal.