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Capital account liberalization, financial development and industry growth: A synthetic view

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  • Eichengreen, Barry
  • Gullapalli, Rachita
  • Panizza, Ugo

Abstract

This paper synthesizes studies analyzing the effects of capital account liberalization on industry growth while controlling for financial crises, domestic financial development and the strength of institutions. We find evidence that financial openness has positive effects on the growth of financially dependent industries, although these growth-enhancing effects evaporate during financial crises. Further analysis indicates that the positive effects of capital account liberalization are limited to countries with relatively well-developed financial systems, good accounting standards, strong creditor rights and rule of law. It suggests that countries must reach a certain threshold in terms of institutional and economic development before they can expect to benefit from capital account liberalization.

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Bibliographic Info

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

Volume (Year): 30 (2011)
Issue (Month): 6 (October)
Pages: 1090-1106

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Handle: RePEc:eee:jimfin:v:30:y:2011:i:6:p:1090-1106

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

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Keywords: Capital account liberalization Financial development External dependence;

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Citations

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Cited by:
  1. Hattendorff, Christian, 2012. "Do natural resource sectors rely less on external finance than manufacturing sectors?," Discussion Papers 2012/17, Free University Berlin, School of Business & Economics.
  2. Philip R. Lane IIIS, Trinity College Dublin and CEPR, 2009. "Innovation and Financial Globalisation," The Institute for International Integration Studies Discussion Paper Series iiisdp299, IIIS.
  3. Enrico Berkes & Ugo Panizza & Jean-Louis Arcand, 2012. "Too Much Finance?," IMF Working Papers 12/161, International Monetary Fund.
  4. Giuranno, Michele, 2009. "The logic of party coalitions with political activism and public financing," POLIS Working Papers 134, Institute of Public Policy and Public Choice - POLIS.
  5. Dumitriu, Ramona & Stefanescu, Razvan, 2011. "Shocks on the Romanian foreign exchange market before and after the global crisis," MPRA Paper 36560, University Library of Munich, Germany, revised 09 Feb 2012.
  6. Nicola Cetorelli & Stavros Peristiani, 2009. "Prestigious stock exchanges: a network analysis of international financial centers," Staff Reports 384, Federal Reserve Bank of New York.
  7. A. Yasemin Yalta & A. Talha Yalta, 2011. "Does Financial Liberalization Decrease Capital Flight? A Panel Causality Analysis," Working Papers 1102, TOBB University of Economics and Technology, Department of Economics.
  8. Fischer, Ronald & Valenzuela, Patricio, 2013. "Financial openness, market structure and private credit: An empirical investigation," Economics Letters, Elsevier, vol. 121(3), pages 478-481.
  9. Bondonio, Daniele, 2009. "Impact identification strategies for evaluating business incentive programs," POLIS Working Papers 129, Institute of Public Policy and Public Choice - POLIS.
  10. Keith E. Maskus & Rebecca Neumann & Tobias Seidel, 2011. "How National and International Financial Development Affect Industrial R&D," CESifo Working Paper Series 3480, CESifo Group Munich.
  11. Demir, Firat & Caglayan, Mustafa, 2012. "Firm Productivity, Exchange Rate Movements, Sources of Finance and Export Orientation," MPRA Paper 37397, University Library of Munich, Germany.
  12. Soumia Zenasni & Abderrezak Benhabib, 2013. "Capital Account Liberalization and Economic Growth in Developing Economies: An Empirical Investigation," Global Financial Markets Working Paper Series 40-2012, Friedrich-Schiller-University Jena.
  13. Bonatti, Luigi & Fracasso, Andrea, 2013. "Hoarding of international reserves in China: Mercantilism, domestic consumption and US monetary policy," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 1044-1078.
  14. Tahsin Saadi Sedik & Tao Sun, 2012. "Effects of Capital Flow Liberalization," IMF Working Papers 12/275, International Monetary Fund.
  15. Orso, Cristina Elisa, 2009. "Formal and informal sectors: Interactions between moneylenders and traditional banks in the rural Indian credit market," POLIS Working Papers 135, Institute of Public Policy and Public Choice - POLIS.
  16. Hosamane, Manjappa & Rajanna, Niranjan, 2010. "Financial Liberalization, Development and Industrial Growth: Evidence from India," MPRA Paper 55624, University Library of Munich, Germany.

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