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A Pragmatic Approach to Capital Account Liberalization

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  • Prasad, Eswar

    (Cornell University)

  • Rajan, Raghuram G.

    (University of Chicago)

Abstract

Cross-country regressions suggest little connection from foreign capital inflows to more rapid economic growth for developing countries and emerging markets. This suggests that the lack of domestic savings is not the primary constraint on growth in these economies, as implicitly assumed in the benchmark neoclassical framework. We explore emerging new theories on both the costs and benefits of capital account liberalization, and suggest how one might adopt a pragmatic approach to the process.

Suggested Citation

  • Prasad, Eswar & Rajan, Raghuram G., 2008. "A Pragmatic Approach to Capital Account Liberalization," IZA Discussion Papers 3475, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3475
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    More about this item

    Keywords

    collateral benefits; capital controls; capital account liberalization; thresholds;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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