Has Capital Account Liberalization in Latin American Countries Led to Higher and More Stable Capital Inflows?

Arguments for capital account liberalization are based on the presumed positive consequences on the economic growth of liberalizing economies. On the basis of those arguments, most Latin American countries have been engaged in intense domestic and international financial liberalization processes during the last two decades. However, the existence of a push in favor of economic growth from capital account liberalization is conditional on higher capital inflows. Mainstream analyses accept as axiom that capital account liberalization would automatically lead to higher and more stable capital inflows. The paper analyses whether capital account liberalization has actually entailed higher and more stable capital inflows in Latin America in the last few decades.