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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 () (Department of Economics,University of Delaware)
Halit Yanikkaya () (Department of Economics, Celal Bayar University)

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Abstract

This paper investigates the relationship between capital account openness and growth. Our empirical investigation of the effects of capital restrictions on growth provides evidence supporting capital account liberalization, especially for developed countries. We also show that capital restrictions are more likely to reduce the benefits of foreign direct investment on growth in developing countries. Estimation results for long-term capital flows demonstrate that countries with higher flows tend to grow faster, and these results challenge the belief that countries must have attained a threshold level of development or human capital to benefit from capital inflows. Moreover, our results imply a substitute relationship between trade with developed countries and foreign direct investment inflows.

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File URL: http://www.lerner.udel.edu/economics/WorkingPapers/2003/UDWP2003-06.pdf
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Publisher Info
Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 03-06.

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Length: 42 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:dlw:wpaper:03-06

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Postal: Purnell Hall, Newark, Delaware 19716
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Web page: http://www.lerner.udel.edu/departments/economics/
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Related research
Keywords: Financial Openness; Capital Controls; Capital Flows; Economic Growth;

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Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O50 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - General

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