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Capital Account Openness, International Trade, and Economic Growth: A Cross-Country Empirical Investigation

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Author Info
James L. Butkiewicz
Halit Yanikkaya

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Abstract

New empirical estimates of the effects of capital restrictions on growth support capital account liberalization, especially for developed countries. Capital restrictions reduce the benefits of foreign direct investment (FDI) on growth in developing countries. Estimation results for long-term capital flows demonstrate that countries with higher flows grow faster, challenging the belief that countries must attain a threshold level of development or human capital to benefit from capital inflows. Moreover, findings show that trade with developed countries and FDI inflows are substitutes in developing countries. Overall, the results support capital account liberalization in developed and developing countries.

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File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=552K8L2541805727
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Publisher Info
Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 44 (2008)
Issue (Month): 2 (March)
Pages: 15-38
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Handle: RePEc:mes:emfitr:v:44:y:2008:i:2:p:15-38

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

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Related research
Keywords: capital controls capital flows economic growth financial openness

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