Capital Account Liberalization: Allocative Efficiency or Animal Spirits?
Anusha Chari () and
Peter Henry ()
No 8908, NBER Working Papers from National Bureau of Economic Research, Inc
In the year that capital-poor countries open their stock markets to foreign investors, the growth rate of their typical firm's capital stock exceeds its pre-liberalization mean by 4.1 percentage points. In each of the next three years the average growth rate of the capital stock for the 369 firms in the sample exceeds its pre-liberalization mean by 6.1 percentage points. However, there is no evidence that differences in the liberalization-induced changes in the cost of capital or investment opportunities drive the cross-sectional variation in the post-liberalization investment increases.
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Working Paper: Capital Account Liberalization: Allocative Efficiency or Animal Spirits? (2002)
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