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A Pragmatic Approach to Capital Account Liberalization

  • Eswar S. Prasad
  • Raghuram Rajan

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14051.

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Date of creation: Jun 2008
Publication status: published as Eswar S. Prasad & Raghuram G. Rajan, 2008. "A Pragmatic Approach to Capital Account Liberalization," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 149-72, Summer.
Handle: RePEc:nbr:nberwo:14051
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