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  • Mukerji, Purba
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    Abstract

    This paper investigates whether the impact of capital account convertibility on the long term volatility of economic growth depends on financial development. It estimates a system of three simultaneous equations: mean growth, volatility of growth and financial development. This allows for the study of both, the impact of capital account liberalization on volatility, as well as its direct impact on financial development. Results indicate that economies with low financial development fall prey to excess volatility arising from capital account openness, while capital account openness itself has a significant positive impact on financial development. The results are robust to alternative measures of financial development and volatility and to the removal of outliers.

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    File URL: http://www.sciencedirect.com/science/article/B6V9S-4TTMN5P-1/2/98f8069a53ac3c30d0d9d390b10f4759
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 28 (2009)
    Issue (Month): 6 (October)
    Pages: 1006-1021

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    Handle: RePEc:eee:jimfin:v:28:y:2009:i:6:p:1006-1021

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Volatility Capital account convertibility Financial development;

    References

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    Cited by:
    1. Kose, M. Ayhan & Prasad, Eswar S. & Taylor, Ashley D., 2009. "Thresholds in the process of international financial integration," Policy Research Working Paper Series 5149, The World Bank.
    2. Harry H. Kelejian & Gianfranco Piras, 2013. "Estimation of Spatial Models with Endogenous Weighting Matrices and an Application to a Demand Model for Cigarettes," Working Papers 201302, Regional Research Institute, West Virginia University.
    3. Prasad, Eswar, 2009. "India's Approach to Capital Account Liberalization," IZA Discussion Papers 3927, Institute for the Study of Labor (IZA).

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