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Does Capital Account Liberalization Lead to Growth?

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  • Dennis P. Quinn
  • A. Maria Toyoda

Abstract

We test whether capital account liberalization led to higher economic growth using de jure measures of capital account and financial current account openness for 94 nations, from 1950 (or independence) onward. We argue that measurement error, differing time periods used, and collinearity among independent variables account for conflicting results in prior scholarship. We use pooled time-series, cross-sectional OLS and system GMM estimators to examine economic growth rates, 1955--2004. Capital account liberalization had a positive association with growth in both developed and emerging market nations. We confirm that equity market liberalization has an independent effect on economic growth. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Suggested Citation

  • Dennis P. Quinn & A. Maria Toyoda, 2008. "Does Capital Account Liberalization Lead to Growth?," The Review of Financial Studies, Society for Financial Studies, vol. 21(3), pages 1403-1449, May.
    • Handle: RePEc:oup:rfinst:v:21:y:2008:i:3:p:1403-1449
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