When Does Capital Account Liberalization Help More than It Hurts?
AbstractIn this paper we reconsider the evidence on capital account liberalization and growth. While we find indications of a positive association, the effects vary with time, with how capital account liberalization is measured, and with how the relationship is estimated. The evidence that the effects of capital account liberalization are stronger in high-income countries is similarly fragile. There is some evidence that the positive growth effects of liberalization are stronger in countries with strong institutions, as measured by standard indicators of the rule of law, but only weak evidence that the benefits grow with a country's financial depth and development. We find more evidence of a correlation between capital account liberalization and growth when we allow the effect to vary with other dimensions of openness. There are two interpretations of this finding, one in terms of the sequencing of trade and financial liberalization, the other in terms of the need to eliminate major macroeconomic imbalances before opening the capital account. By and large our results support the second interpretation.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8414.
Date of creation: Aug 2001
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- Arteta, Carlos & Eichengreen, Barry & Wyplosz, Charles, 2001. "When Does Capital Account Liberalization Help More Than it Hurts?," CEPR Discussion Papers 2910, C.E.P.R. Discussion Papers.
- F0 - International Economics - - General
- F2 - International Economics - - International Factor Movements and International Business
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-08-15 (All new papers)
- NEP-IFN-2001-08-15 (International Finance)
- NEP-PKE-2001-08-15 (Post Keynesian Economics)
- NEP-REG-2001-08-15 (Regulation)
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