EconPapers    
Economics at your fingertips  
 

Adjusting to Capital Account Liberalization

Kosuke Aoki, Gianluca Benigno and Nobuhiro Kiyotaki

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We study theoretically how the adjustment to liberalization of international financial transaction depends upon the degree of domestic financial development. Using a model with domestic and international borrowing constraints, we show that, when the domestic financial system is underdeveloped, capital account liberalization is not necessarily beneficial because TFP stagnates in the long-run or employment decreases in the short-run. Government policy, including allowing foreign direct investment, can mitigate the possible loss of employment, but cannot eliminate it unless the domestic financial system is improved.

Keywords: credit frictions; capital account liberalization (search for similar items in EconPapers)
JEL-codes: F32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ifn and nep-opm
Date: 2010-10
References: Add references at CitEc
Citations View citations in EconPapers (71) Track citations by RSS feed

Downloads: (external link)
http://cep.lse.ac.uk/pubs/download/dp1014.pdf (application/pdf)

Related works:
Working Paper: Adjusting to Capital Account Liberalization (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1014

Access Statistics for this paper

More papers in CEP Discussion Papers from Centre for Economic Performance, LSE
Series data maintained by ().

 
Page updated 2018-01-02
Handle: RePEc:cep:cepdps:dp1014