Does Openness to International Financial Flows Raise Productivity Growth?
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
This paper provides a comprehensive analysis of the relationship between financial openness and total factor productivity (TFP) growth using an extensive dataset that includes various measures of productivity and financial openness for a large sample of countries. We find that de jure capital account openness has a robust positive effect on TFP growth. The effect of de facto financial integration on TFP growth is less clear, but this masks an important and novel result. We find strong evidence that FDI and portfolio equity liabilities boost TFP growth while external debt is actually negatively correlated with TFP growth. The negative relationship between external debt liabilities and TFP growth is attenuated in economies with higher levels of financial development and better institutions.
Series:
Working Paper No. 2008/242
Subject:
Capital account Financial integration Foreign direct investment Stocks Total factor productivity
English
Publication Date:
October 1, 2008
ISBN/ISSN:
9781451871005/1018-5941
Stock No:
WPIEA2008242
Pages:
39
Please address any questions about this title to publications@imf.org