TY  - JOUR
AU  - Klein,Michael W.
TI  - Capital Account Liberalization, Institutional Quality and Economic Growth: Theory and Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11112
PY  - 2005
Y2  - February 2005
UR  - http://www.nber.org/papers/w11112
L1  - http://www.nber.org/papers/w11112.pdf
N1  - Author contact info:
Michael W. Klein
Fletcher School
Tufts University
Medford, MA 02155
Tel: (617) 627-2718
Fax: (617) 627-3712
E-Mail: michael.klein@tufts.edu
AB  - This paper shows that the effect of capital account liberalization on growth depends upon the environment in which that policy occurs. A theoretical model demonstrates the possibility of an inverted-U shaped relationship between the responsiveness of growth to capital account liberalization and institutional quality. Three empirical specifications based on the model are estimated using a panel of 71 countries. Estimates of all three specifications support the hypothesis of a non-monotonic interaction between the responsiveness of growth to capital account liberalization and institutional quality, with about one-quarter of the countries, those with better (but not the best) institutions exhibiting a statistically significant and economically meaningful effect of capital account openness on economic growth.
ER  -