This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Influence of Capital Controls on Long Run Growth: Where and How Much?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Areendam Chanda (North Carolina State University)

Additional information is available for the following registered author(s):

Abstract

The recent financial crisis in East Asia generated a revival of interest in the merits of financial openness. The ensuing debate on the benefits of openness has focused more on short and medium run issues than on the long run effects. Within the empirical literature on economic growth, little or no attention has been paid to the effects of financial openness. Contrary to the orthodox position, the few results that exist suggest that capital controls have no effect on economic growth. This paper argues that this conclusion emerges from a failure to account for underlying differences across countries with similar degrees of capital controls. I show that the degree of ethnic and linguistic heterogeneity in a country plays a significant role in explaining the effects of controls on economic growth. For countries with relatively higher degrees of ethnic heterogeneity, the effects are particularly adverse whereas for countries with high degrees of homogeneity, capital controls actually have a net positive effect on economic growth. On balance, more developing countries suffered due to controls than not. Within the sample of 57 non OECD countries that did implement controls for the period 1975-95, as many as 39 saw a reduction in their growth rates. This result is robust to a number of variables commonly used in the economic growth regressions.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://129.3.20.41/eps/if/papers/0201/0201001.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by EconWPA in its series International Finance with number 0201001.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 41 pages
Date of creation: 09 Jan 2002
Date of revision:
Handle: RePEc:wpa:wuwpif:0201001

Note: Type of Document - Acrobat Pdf; prepared on IBM PC ; to print on HP; pages: 41; figures: included
Contact details of provider:
Web page: http://129.3.20.41

For technical questions regarding this item, or to correct its listing, contact: (EconWPA).

Related research
Keywords: Economic Growth; Capital Controls; Ethno-Linguistic Fractionalization;

Other versions of this item:

Find related papers by JEL classification:
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. William Easterly, 1995. "Explaining Miracles: Growth Regressions Meet the Gang of Four," NBER Chapters, in: Growth Theories in Light of the East Asian Experience, NBER-EASE Volume 4, pages 267-299 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  2. Michael P. Dooley & Donald J. Mathieson, 1992. "Exchange rate policy, international capital mobility and monetary policy instruments," Proceedings, Federal Reserve Bank of San Francisco, pages 68-95.
  3. Alesina, Alberto F & Grilli, Vittorio & Milesi-Ferretti, Gian Maria, 1993. "The Political Economy of Capital Controls," CEPR Discussion Papers 793, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October. [Downloadable!] (restricted)
  5. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August. [Downloadable!] (restricted)
  6. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall. [Downloadable!] (restricted)
    Other versions:
  7. Michael P. Dooley, 1995. "A Survey of Academic Literature on Controls over International Capital Transactions," NBER Working Papers 5352, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September. [Downloadable!] (restricted)
  10. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-national Evidence," Electronic Working Papers 99-003, University of Maryland, Department of Economics. [Downloadable!]
    Other versions:
  11. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
    Other versions:
  12. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Jeffrey A. Frankel & C. Fred Bergsten & Michael L. Mussa, 1994. "Exchange Rate Policy," NBER Chapters, in: American Economic Policy in the 1980s, pages 293-366 National Bureau of Economic Research, Inc. [Downloadable!]
  15. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  16. Gian Maria Milesi-Ferretti & Vittorio Grilli, 1995. "Economic Effects and Structural Determinants of Capital Controls," IMF Working Papers 95/31, International Monetary Fund.
  17. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
    Other versions:
  18. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June. [Downloadable!] (restricted)
    Other versions:
  19. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
    Other versions:
  20. Easterly, William, 2000. "Can institutions resolve ethnic conflict ?," Policy Research Working Paper Series 2482, The World Bank. [Downloadable!]
    Other versions:
  21. Michael W. Klein & Giovanni Olivei, 1999. "Capital Account Liberalization, Financial Depth and Economic Growth," NBER Working Papers 7384, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  22. R. B. Johnston & Chris Ryan, 1994. "The Impact of Controls on Capital Movements on the Private Capital Accounts of Countries' Balance of Payments: Empirical Estimates and Policy Implications," IMF Working Papers 94/78, International Monetary Fund.
  23. Jonathan Temple & Paul A. Johnson, 1998. "Social Capability And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 965-990, August. [Downloadable!] (restricted)
  24. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August. [Downloadable!] (restricted)
    Other versions:
  25. R. B. Johnston & Natalia T. Tamirisa, 1998. "Why Do Countries Use Capital Controls?," IMF Working Papers 98/181, International Monetary Fund.
  26. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank. [Downloadable!]
    Other versions:
  27. Benhabib, J. & Spiegel, M., 1992. "The Role of Human Capital in economic Development: Evidence form Aggregate Cross-Country Regional U.S. Data," Working Papers 92-46, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  28. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, Oxford University Press, vol. 10(3), pages 565-91, September.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bonfiglioli, Alessandra & Mendicino, Caterina, 2004. "Financial Liberalization, Banking Crises and Growth: Assessing the Links," Working Paper Series in Economics and Finance 567, Stockholm School of Economics. [Downloadable!]
  2. Nicolas Magud & Carmen M. Reinhart, 2005. "Capital Controls: An Evaluation," University of Oregon Economics Department Working Papers 2005-19, University of Oregon Economics Department. [Downloadable!]
    Other versions:
  3. Axel Dreher, 2002. "Does Globalization Affect Growth?," Development and Comp Systems 0210004, EconWPA, revised 04 Feb 2003. [Downloadable!]
  4. Calderon, Cesar & Loayza, Norman & Schmidt-Hebbel, Klaus, 2005. "Does openness imply greater exposure ?," Policy Research Working Paper Series 3733, The World Bank. [Downloadable!]
  5. Hali J. Edison & Michael W. Klein & Luca Ricci & Torsten Sloek, 2002. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," NBER Working Papers 9100, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. César Calderón & Norman V. Loayza & Klaus Schmidt-Hebbel, 2008. "Does Openness Imply Greater Vulnerability?," Working Papers Central Bank of Chile 485, Central Bank of Chile. [Downloadable!]
  7. Saoussen Ben Gamra & Mickaël Clévenot, 2008. "Les effets ambigus de la libéralisation financière dans les pays en développement Croissance économique ou instabilité financière ?," Post-Print hal-00323334_v1, HAL. [Downloadable!]
  8. Nicolas Magud & Carmen Reinhart & Kenneth Rogoff, 2005. "Capital Controls: Myth and Reality A Portfolio Balance Approach to Capital Controls," University of Oregon Economics Department Working Papers 2006-10, University of Oregon Economics Department. [Downloadable!]
    Other versions:
  9. Anthony Makin & Wei Zhang & Grant Scobie, 2008. "The Contribution of Foreign Borrowing to the New Zealand Economy," Treasury Working Paper Series 08/03, New Zealand Treasury. [Downloadable!]
  10. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor and Francis Journals, vol. 38(10), pages 1091-1110, June. [Downloadable!] (restricted)
    Other versions:
  11. Vadlamannati, Krishna Chaitanya, 2008. "Do Elections Slow Down Economic Globalization Process In India? It’S Politics Stupid !," MPRA Paper 10139, University Library of Munich, Germany. [Downloadable!]
  12. Andrew Sumner, 2006. "Why Are We Still Arguing about Globalisation," Working Papers id:538, esocialsciences.com. [Downloadable!]
  13. Alessandra Bonfiglioli & Caterina Mendicino, 2004. "Financial Liberalization, Bank Crises and Growth: Assessing the Links," Economics Working Papers 946, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? RePEc encourages publishers to make their bibliographic data freely available to the public.

This page was last updated on 2009-11-13.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.