Working Paper: NBER ID: w9500
Authors: Michael W. Klein
Abstract: The effects of capital account openness on economic growth may vary across countries. Some countries may not have in place the constellation of institutions required to fully benefit from open capital accounts. Other countries may realize only small marginal improvements in the wake of capital account liberalization. This paper presents evidence of an inverted-U shaped relationship between the responsiveness of growth to capital account openness and income per capita. Middle-income countries benefit significantly from capital account openness. However, neither rich nor poor countries exhibit statistically significant positive effects. A similar inverted-U shaped relationship is found between the responsiveness of growth to capital account openness and various indicators of government quality.
Keywords: No keywords provided
JEL Codes: F32; F33; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital account openness (F30) | economic growth (O49) |
| income per capita (D31) | responsiveness of growth to capital account openness (F43) |
| government quality (H11) | significance of capital account openness in growth regressions (F43) |
| capital account openness (F30) | negative effects for poorer countries (F63) |
| institutional factors (D02) | mediating effects of capital account liberalization (F32) |