NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

When Does Capital Account Liberalization Help More than It Hurts?

Carlos Arteta, Barry Eichengreen, Charles Wyplosz

NBER Working Paper No. 8414
Issued in August 2001
NBER Program(s):International Finance and Macroeconomics

In this paper we reconsider the evidence on capital account liberalization and growth. While we find indications of a positive association, the effects vary with time, with how capital account liberalization is measured, and with how the relationship is estimated. The evidence that the effects of capital account liberalization are stronger in high-income countries is similarly fragile. There is some evidence that the positive growth effects of liberalization are stronger in countries with strong institutions, as measured by standard indicators of the rule of law, but only weak evidence that the benefits grow with a country's financial depth and development. We find more evidence of a correlation between capital account liberalization and growth when we allow the effect to vary with other dimensions of openness. There are two interpretations of this finding, one in terms of the sequencing of trade and financial liberalization, the other in terms of the need to eliminate major macroeconomic imbalances before opening the capital account. By and large our results support the second interpretation.

download in pdf format
   (192 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8414

Users who downloaded this paper also downloaded* these:
Edison, Klein, Ricci, and Sloek w9100 Capital Account Liberalization and Economic Performance: Survey and Synthesis
Henry w12698 Capital Account Liberalization: Theory, Evidence, and Speculation
Alesina, Grilli, and Maria Milesi-Ferrett w4353 The Political Economy of Capital Controls
Henry w9488 Capital Account Liberalization, The Cost of Capital, and Economic Growth
Prasad and Rajan w14051 A Pragmatic Approach to Capital Account Liberalization
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us