TY  - JOUR
AU  - Arteta,Carlos
AU  - Eichengreen,Barry
AU  - Wyplosz,Charles
TI  - When Does Capital Account Liberalization Help More than It Hurts?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8414
PY  - 2001
Y2  - August 2001
UR  - http://www.nber.org/papers/w8414
L1  - http://www.nber.org/papers/w8414.pdf
N1  - Author contact info:
Carlos Arteta
Federal Reserve Board
E-Mail: Carlos.O.Arteta@frb.gov

Barry Eichengreen
Department of Economics
University of California, Berkeley
549 Evans Hall 3880
Berkeley, CA 94720-3880
Tel: 510/642-2772
Fax: 510/643-0926
E-Mail: eichengr@econ.Berkeley.edu

Charles Wyplosz
Graduate Institute of International Studies
Avenue de la Paix 11a
1202 Geneva
Switzerland
Tel: 41 22 908 5946
Fax: 41 22 733 3049
E-Mail: charles.wyplosz@graduateinstitute.ch
AB  - 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.
ER  -