Location of Repository

Capital Account Liberalization, Financial Depth and Economic Growth

By Michael W. Klein and Giovanni Olivei

Abstract

We show a statistically significant and economically relevant effect of open capital accounts on financial deepness and economic growth in a cross-section of countries over the period 1986 to 1995. Countries with open capital accounts over some or all of this period had a significantly greater increase in financial depth than countries with continuing capital account restrictions, and they also enjoyed greater economic growth. There results, however, are largely driven by the developed countries in the sample. The observed failure of capital account liberalization to promote financial deepness among developing countries suggests potentially important policy implications concerning the desirability of liberalizing the capital account.

OAI identifier:

Suggested articles

Preview

Citations

  1. (1969). A Theory of Economic History,
  2. (1998). and Finance,”
  3. (2001). Asli Demirguc-Kunt and Ross Levine, “The Financial Structure Database,”
  4. (2004). Capital Account Liberalization and Economic Performance: Survey and Synthesis,”
  5. (2002). Capital Account Liberalization, Institutions, and Financial Development: Cross-Country Evidence,”
  6. (2005). Capital Account Openness,
  7. (1995). Economic Effects and Structural Determinants of Capital Controls,”
  8. (1993). Finance and Growth: Schumpeter Might be Right,”
  9. (1997). Financial Development and Economic Growth: Views and Agenda,”
  10. (1990). Financial Development, Growth, and the Distribution of Income,”
  11. (1999). Financial Integration, Financial Development,
  12. (1991). Financial Intermediation and Endogenous Growth,”
  13. (2000). Financial Intermediation and Growth: Causality and Causes,”
  14. (1995). Institutions and Economic Performance: CrossCountry Tests Using Alternative
  15. (1999). International Capital Flows: Discussion,”
  16. (2000). International Financial Crises: Causes, Prevention, and Cures,” American Economic Review,
  17. (1999). Making Openness Work: The New Global Economy and the Developing Countries, Overseas Development Council,
  18. (1973). Money and Capital in Economic Development,
  19. (2003). Shang-Jin Wei and Ayhan Kose, Effects of Financial Globalizationon Developing Countries,
  20. (1997). The Correlates of Change in
  21. (2001). The Impact of Inflation on Financial Sector Performance,”
  22. (2000). The level and growth rate of per capita GDP, the ratio of the sum of imports and exports to GDP, and secondary school enrollment come from the World Bank World Development Indicators
  23. (1912). The Theory of Economic Development,
  24. (1998). Who Needs Capital-Account Convertibility?” in Stanley Fischer, et al., Should the IMF Pursue Capital Account Convertibility?

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.