Capital Account Liberalization, Financial Depth and Economic Growth

32 Pages Posted: 8 Aug 2012

See all articles by Michael W. Klein

Michael W. Klein

Tufts University - The Fletcher School of Law and Diplomacy; National Bureau of Economic Research (NBER)

Giovanni Olivei

Federal Reserve Bank of Boston

Date Written: October 1999

Abstract

We show a statistically significant and economically relevant effect of open capital accounts on financial deepness and economic growth in a cross-section of countries over the period 1986 to 1995. Countries with open capital accounts over some or all of this period had a significantly greater increase in financial depth than countries with continuing capital account restrictions, and they also enjoyed greater economic growth. There results, however, are largely driven by the developed countries in the sample. The observed failure of capital account liberalization to promote financial deepness among developing countries suggests potentially important policy implications concerning the desirability of liberalizing the capital account.

Suggested Citation

Klein, Michael W. and Olivei, Giovanni, Capital Account Liberalization, Financial Depth and Economic Growth (October 1999). NBER Working Paper No. w7384. Available at SSRN: https://ssrn.com/abstract=193789

Michael W. Klein (Contact Author)

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Medford, MA 02155
United States
617-627-2718 (Phone)
617-627-3712 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Giovanni Olivei

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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