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Capital Account Liberalization and Economic Performance: Survey and Synthesis

  • Hali J. Edison

    (International Monetary Fund)

  • Michael W. Klein

    (International Monetary Fund)

  • Luca Antonio Ricci

    (International Monetary Fund)

  • Torsten Sløk

    (International Monetary Fund)

This paper reviews the literature on the effects of capital account liberalization and stock market liberalization on economic growth. The various empirical measures used to gauge the presence of controls on capital account transactions as well as indicators of stock market liberalization are discussed. We compare detailed measures of capital account controls that attempt to capture the intensity of enforcement with others that simply capture whether or not controls are present. Our review of the literature shows the contrasting results that have been obtained. These differences may reflect differences in country coverage, sample periods and indicators of liberalization. In order to reconcile these differences, we present new estimates of the effects on growth of capital account liberalization and stock market liberalization. We find some support for a positive effect of capital account liberalization on growth, especially for developing countries.

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Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 51 (2004)
Issue (Month): 2 ()
Pages: 2

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Handle: RePEc:pal:imfstp:v:51:y:2004:i:2:p:2
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  1. Edison, Hali J. & Warnock, Francis E., 2003. "A simple measure of the intensity of capital controls," Journal of Empirical Finance, Elsevier, vol. 10(1-2), pages 81-103, February.
  2. Bailliu, Jeannine N., 2000. "Private Capital Flows, Financial Development, and Economic Growth in Developing Countries," Staff Working Papers 00-15, Bank of Canada.
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  7. Kaplan, Ethan & Rodrik, Dani, 2001. "Did the Malaysian Capital Controls Work?," Working Paper Series rwp01-008, Harvard University, John F. Kennedy School of Government.
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  15. Reinhart, Carmen & Edison, Hali, 2001. "Stopping hot money," MPRA Paper 13862, University Library of Munich, Germany.
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  18. Reinhart, Carmen & Montiel, Peter, 1999. "Do capital controls influence the volume and composition of capital flows? Evidence from the 1990s," MPRA Paper 13710, University Library of Munich, Germany.
  19. Areendam Chanda, 2002. "The Influence of Capital Controls on Long Run Growth: Where and How Much?," International Finance 0201001, EconWPA.
  20. Russell Davidson & James G. MacKinnon, 2001. "Artificial Regressions," Working Papers 1038, Queen's University, Department of Economics.
  21. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
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  24. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  25. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
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