Working Paper: NBER ID: w30944
Authors: Paul Bergin; Woo Jin Choi; Ju H. Pyun
Abstract: While substantial empirical research has evaluated the question of whether capital account openness promotes economic growth, this paper finds empirical evidence for cases where the opposite is true—that a policy of capital controls can promote economic growth, when combined with a policy of reserve accumulation. Using panel data from 45 countries from 1985–2019, we find that capital controls combined with reserve accumulation—strategic capital account policy—contribute to growth in real GDP and TFP. This effect is stronger for emerging markets and prior to the global financial crisis. We show that the policy is strongly associated with enlarging the scale of the manufacturing sector and productivity, and is consistent with theories of learning-by-doing through exporting.
Keywords: No keywords provided
JEL Codes: E58; F21; F31; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital controls combined with reserve accumulation (F32) | real GDP growth (O49) |
| capital controls combined with reserve accumulation (F32) | TFP growth (O49) |
| capital controls combined with reserve accumulation (F32) | manufacturing labor productivity growth (O49) |
| capital controls combined with reserve accumulation (F32) | real value-added share of manufacturing sector (L69) |