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):   IFM

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

This paper is available as PDF (192 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8414

Users who downloaded this paper also downloaded these:
Edwards w8076 Capital Mobility and Economic Performance: Are Emerging Economies Different?
Klein and Olivei w7384 Capital Account Liberalization, Financial Depth and Economic Growth
Klein w11112 Capital Account Liberalization, Institutional Quality and Economic Growth: Theory and Evidence
Klein w9500 Capital Account Openness and the Varieties of Growth Experience
Chinn and Ito w8967 Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

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

Contact Us