Financial Services And Capital Account Liberalization In Developing Countries

The paper discusses the financial services liberalization in developing countries under GATS, and how it promote the capital account liberalization process in these countries and reduce the potential risk involved. The discussion is from two perspectives: first, how does the opening of financial services affect the host countries' financial system capacity; second, how does the opening of financial services affect international capital flows.Drawing from Kono's analysis, the paper points out that since different molds of financial service trade differ in their affect on financial system and capital flow, developing countries can adopt a sequential financial services liberalization to prepare themselves for capital account liberalization, and to reduce the potential risk involved.