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Who Benefits from Capital Account Liberalization? Evidence from Firm-Level Credit Ratings Data

Author/Editor: Prati, Alessandro | Schindler, Martin | Valenzuela, Patricio
Authorized for Distribution: September 1, 2009
Electronic Access: Free Full Text (PDF file size is 1,152KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We provide new firm-level evidence on the effects of capital account liberalization. Based on corporate foreign-currency credit ratings data and a novel capital account restrictions index, we find that capital controls can substantially limit access to, and raise the cost of, foreign currency debt, especially for firms without foreign currency revenues. As an identification strategy, we exploit, via a difference-in-difference approach, within-country variation in firms' access to foreign currency, measured by whether or not a firm belongs to the nontradables sector. Nontradables firms benefit substantially more from capital account liberalization than others, a finding that is robust to a broad range of alternative specifications.
 
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Series: Working Paper No. 09/210
Subject(s): Access to capital markets | Asset management | Capital account liberalization | Capital controls | Corporate sector | Credit | Debt | Economic models | Foreign exchange transactions | Foreign investment | Time series
Author's keyword(s): Capital account liberalization; capital controls; credit access; credit ratings
 
English  
    Published:   September 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009210   Pages:   34
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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