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Who Benefits from Capital Account Liberalization? Evidence from Firm-Level Credit Ratings Data

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Author Info
Martin Schindler
Patricio Valenzuela
Alessandro Prati

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Abstract

We provide new firm-level evidence on the effects of capital account liberalization. Based on corporate foreign-currency credit ratings data and a novel capital account restrictions index, we find that capital controls can substantially limit access to, and raise the cost of, foreign currency debt, especially for firms without foreign currency revenues. As an identification strategy, we exploit, via a difference-in-difference approach, within-country variation in firms' access to foreign currency, measured by whether or not a firm belongs to the nontradables sector. Nontradables firms benefit substantially more from capital account liberalization than others, a finding that is robust to a broad range of alternative specifications.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/210.

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Length: 34 pages
Date of creation: 29 Sep 2009
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Handle: RePEc:imf:imfwpa:09/210

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Related research
Keywords: Access to capital markets ; Asset management ; Capital account liberalization ; Capital controls ; Corporate sector ; Credit ; Debt ; Economic models ; Foreign exchange transactions ; Foreign investment ; Time series ;

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