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

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  • James L. Butkiewicz
  • Halit Yanikkaya

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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Bibliographic 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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Keywords: capital controls; capital flows; economic growth; financial openness;

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Cited by:
  1. Mare Sarr & Erwin Bulte & Chris Meissner & Tim Swanson, 2011. "On the looting of nations," Public Choice, Springer, vol. 148(3), pages 353-380, September.
  2. Mazhar MUGHAL & Natalia VECHIU, 2010. "The role of Foreign Direct Investment in higher education in the developing countries (Does FDI promote education?)," Working Papers 2010-2011_10, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Nov 2010.
  3. Deepak Sethi & William Judge & Qian Sun, 2011. "FDI distribution within China: An integrative conceptual framework for analyzing intra-country FDI variations," Asia Pacific Journal of Management, Springer, vol. 28(2), pages 325-352, June.

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