Ready for capital account convertibility?

Purba Mukerji

Journal of International Money and Finance, 2009, vol. 28, issue 6, 1006-1021

Abstract: This paper investigates whether the impact of capital account convertibility on the long term volatility of economic growth depends on financial development. It estimates a system of three simultaneous equations: mean growth, volatility of growth and financial development. This allows for the study of both, the impact of capital account liberalization on volatility, as well as its direct impact on financial development. Results indicate that economies with low financial development fall prey to excess volatility arising from capital account openness, while capital account openness itself has a significant positive impact on financial development. The results are robust to alternative measures of financial development and volatility and to the removal of outliers.

Keywords: Volatility; Capital; account; convertibility; Financial; development (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:28:y:2009:i:6:p:1006-1021

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