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

By Alessandro Prati, Martin Schindler, Patricio A Valenzuela

September 1, 2009

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Alessandro Prati, Martin Schindler, and Patricio A Valenzuela. Who Benefits from Capital Account Liberalization? Evidence from Firm-Level Credit Ratings Data, (USA: International Monetary Fund, 2009) accessed October 6, 2024

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.

Subject: Capital account, Capital account liberalization, Credit, Credit ratings, Currencies

Keywords: Capital, Foreign currency, Rating, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/210
Stock No:

WPIEA2009210
ISBN:

9781451873573
ISSN:

1018-5941

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