Capital account liberalization, financial development and industry growth: a synthetic view

Barry Eichengreen (), Rachita Gullapalli and Ugo Panizza

P.O.L.I.S. department's Working Papers from Department of Public Policy and Public Choice - POLIS

Abstract: This paper synthesizes previous studies analyzing the effects of capital account liberalization on industry growth while controlling for financial crises, domestic financial development and the strength of institutions. We find reasonably strong evidence that financial openness has positive effects on the growth of financially-dependent industries, although these growth-enhancing effects evaporate during financial crises. Further analysis indicates that the positive effects of capital account liberalization are limited to countries with relatively well-developed financial systems, good accounting standards, strong creditor rights and rule of law. It suggests that countries must reach a certain threshold in terms of institutional and economic development before they can expect to benefit from capital account liberalization.

Keywords: Capital account liberalization; Financial development; External dependence (search for similar items in EconPapers)
JEL-codes: F34 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-dev, nep-fdg, nep-ifn and nep-opm
Date: 2009-06
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Persistent link: http://EconPapers.repec.org/RePEc:uca:ucapdv:128

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