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Capital Account Openness and Bankruptcies


  • Luis Angeles


This paper presents a model where opening the capital account of an economy causes more bankruptcies to take place in the non tradables sector. Non tradable firms must forecast the future state of the economy when investing since the demand for their goods depends on this. In our model the interest rate is a powerful signal that non tradable firms use when the capital account is closed, but its informational content decreases once the capital account opens up and international (as well as domestic) shocks affect it.
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  • Luis Angeles, 2005. "Capital Account Openness and Bankruptcies," The School of Economics Discussion Paper Series 0542, Economics, The University of Manchester.
  • Handle: RePEc:man:sespap:0542

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    1. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, April.
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    4. Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, vol. 28(6), pages 1075-1086, June.
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    6. Williamson, J. & Drabek, Z., 1999. "Whether and When to Liberalize Capital Account and Financial Services," Papers 99-03, Stanford - Institute for Thoretical Economics.
    7. Sebastian Edwards, 2001. "Capital Mobility and Economic Performance: Are Emerging Economies Different?," NBER Working Papers 8076, National Bureau of Economic Research, Inc.
    8. repec:zbw:wtowps:99-03 is not listed on IDEAS
    9. 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.
    10. Torsten Persson & Guido Tabellini, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 689-701.
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    12. Marco Terrones & Eswar S Prasad & Ayhan Kose, 2003. "Financial Integration and Macroeconomic Volatility," IMF Working Papers 03/50, International Monetary Fund.
    13. Rivera-Batiz, Francisco L, 2001. "International Financial Liberalization, Corruption, and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 727-737, November.
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