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Financial openness and capital mobility: a dynamic panel analysis

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  • Javed Younas
  • Boaz Nandwa

Abstract

Does unrestricted control on the movement of capital increase capital mobility? Theoretically, the answer is yes. This paper uses the Feldstein-Horioka savings-investment methodology to examine the impact of financial openness on the degree of capital mobility in 104 countries. Our estimates suggest that financial openness has increased capital mobility in developing countries, while its effect is statistically insignificant in OECD countries. This also implies that a developing country with more financial openness can have more access to external capital markets for borrowings. Foreign aid also appears to supplement domestic savings for investment in developing countries. In line with the previous findings, our study also confirms that capital is more mobile for developing countries.

Suggested Citation

  • Javed Younas & Boaz Nandwa, 2010. "Financial openness and capital mobility: a dynamic panel analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(2), pages 239-246.
  • Handle: RePEc:taf:irapec:v:24:y:2010:i:2:p:239-246
    DOI: 10.1080/02692170903426021
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    References listed on IDEAS

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    1. Maurice Obstfeld & Kenneth S. Rogoff, 2000. "Perspectives on OECD economic integration : implications for U.S. current account adjustment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 169-208.
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    Cited by:

    1. √Ėmer √Ěskenderoglu & Serpil Tomak, 2013. "Competition and Stability: An Analysis of the Turkish Banking System," International Journal of Economics and Financial Issues, Econjournals, vol. 3(3), pages 752-762.
    2. repec:ebl:ecbull:eb-16-00860 is not listed on IDEAS
    3. Younas, Javed, 2011. "De facto financial openness and capital mobility," Economics Letters, Elsevier, vol. 112(1), pages 60-62, July.

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