Capital Liberalisation and Economic Instability

This study intends to examine the larger issues related to capital liberalisation and also to analyse the reasons for recent support of capital mobility and its repercussions for the future prospects of the economies of developing countries. The objective is to critically examine relevant empirical and theoretical studies in order to answer these questions and address the objectives of this study. The methodology adopted in this study relies on secondary information, reports and published studies to address the research questions. The study finds that following the adoption of capital liberalisation and neoliberalism, the economies of most developing countries have become more vulnerable. If China is excluded, we find that most developing economies have been unable to expand employment opportunities or reduce levels of poverty. In recent years capital liberalisation policy has encouraged capital flight from their economies. Keywords. Capital Liberalisation, financialization, instability and developing countries. JEL. E44, E52, F21.