## Does Openness to International Financial Flows Raise Productivity Growth?

_IMF Working Papers, October 1, 2008_

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## Bibliographic details
- Authors: Eswar S Prasad, Marco Terrones, Ayhan Kose
- Published: October 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451871005.001

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### Summary findings
- The 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.
- 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; however, this masks an important and novel result:
  - Foreign direct investment (FDI) liabilities boost TFP growth.
  - Portfolio equity liabilities boost TFP growth.
  - External debt liabilities are 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.

### Authors, date, and publication identifiers
- Authors: Eswar S Prasad, Marco Terrones, Ayhan Kose
- Date: October 1, 2008
- Series: Working Paper No. 2008/242
- Issue: 242
- Volume: 2008
- Pages: 39
- DOI: https://doi.org/10.5089/9781451871005.001
- Stock No: WPIEA2008242
- ISBN: 9781451871005
- ISSN: 1018-5941

### Key subjects and keywords
- Subject: Capital account, Financial integration, Foreign direct investment, Stocks, Total factor productivity
- Keywords: debt liability, equity liability, TFP calculation, TFP growth, TFP measure, WP

### Research scope and emphasis
- Uses an extensive dataset covering a large sample of countries and various measures of productivity and financial openness.
- Distinguishes between de jure measures of capital account openness and de facto measures of financial integration.
- Emphasizes disaggregated external liabilities (FDI, portfolio equity, external debt) in evaluating relationships with TFP growth.
- Highlights the role of domestic financial development and institutional quality in moderating the effects of external debt liabilities on TFP growth.

*Source: IMF Working Papers page for "Does Openness to International Financial Flows Raise Productivity Growth?"*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/does-openness-to-international-financial-flows-raise-productivity-growth-22387_