Ready for capital account convertibility?

Mukerji, Purba

doi:10.1016/j.jimonfin.2008.10.001

Cited by 16 publications

(8 citation statements)

References 34 publications

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“…There are mixed results from studies where financial depth is interacted with other financial openness measures. Bekaert et al (2005) and Hammel (2006) find higher growth following equity market liberalizations in countries with higher private credit/stock market turnover and stock market capitalization, respectively (also see Bekaert et al, 2009;Mukerji, 2009).…”

Section: Synthesis Of Theory and Evidencementioning

confidence: 99%

Thresholds in the process of international financial integration

Köse

Prasad

Taylor

2011

Journal of International Money and Finance

246

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed, a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses. A major complication, however, is that there seem to be certain "threshold" levels of financial and institutional development that an economy needs to attain before it can derive the indirect benefits and reduce the risks of financial openness. In this paper, we develop a unified empirical framework for characterizing such threshold conditions. We find that there are clearly identifiable thresholds in variables such as financial depth and institutional quality − the cost-benefit trade-off from financial openness improves significantly once these threshold conditions are satisfied. We also find that the thresholds are lower for foreign direct investment and portfolio equity liabilities compared to those for debt liabilities.JEL Classification: F3, F4, O4

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Section: Synthesis Of Theory and Evidencementioning

confidence: 99%

Thresholds in the process of international financial integration

Köse

Prasad

Taylor

2011

Journal of International Money and Finance

246

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“…where W t is an n × n weighting matrix at time t which is based on trade links as described below, G t is the n × 1 vector, at time t , of observations on the average annual growth rate of per capita GDP of each of the n countries during the t th decade, where t = 1 relates to the decade 1960–1969, t = 2 relates to 1970–1979, t = 3 relates to 1980–1989, and t = 4 relates to 1990–1999, X t is an n × 14 matrix of observations on explanatory variables, some of which are endogenous, and ε t is the n × 1 vector of corresponding error terms. The model in is similar to those in Mukerji (2009) and Mobarak (2005).…”

Section: Gdp Growth Modelmentioning

confidence: 78%

Important dynamic indices in spatial models*

Kelejian

Mukerji

2011

Papers in Regional Science

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The purpose of this paper is two-fold. First, in the context of a spatial model we generalize two indices. One is a dynamic generalization of the emanating effect that was introduced by Kelejian and colleagues. This index describes how events in one unit spill over time to other units due to spatial interactions. As an analogy, it corresponds to the effect that the smoking habits of a given teenager might have on the smoking habits of each of his/her friends. In a sense, our second index, termed the vulnerability index, is the reverse of the first one in that it describes the response of a given unit over time to events in neighbouring units. The analogy here would be how the smoking habits of a given teenager is affected by the smoking habits of all of his/her friends. Second, we empirically implement our indices in the context of a model explaining GDP per capita growth in various countries. In this context the vulnerability index describes the sensitivity of GDP growth in one country with respect to events in other countries; the emanating effect describes how events in one country effect the GDP growth in other countries. JEL classification: C2, C3Key words: Spatial models, dynamic emanating and vulnerability indices * We would like to thank James LeSage for very helpful comments on an earlier version of this paper. Of course, he is not responsible for any shortcomings that remain! 1 Among others, other applications of the emanating effect are given in

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“…2 Kose, Prasad and Taylor (2008) review the theoretical basis for such threshold effects and provide some quantitative evidence that thresholds matter, even though it proves difficult to pin down precisely the exact levels of various thresholds. Mukerji (2009) provides evidence that higher levels of financial development and stable macroeconomic policies enable countries to gain modest growth benefits from capital account convertibility, while weak financial systems and macroeconomic vulnerabilities increase growth instability without raising average growth. 6 specific circumstances and initial conditions.…”

Section: Paradoxical Results But Composition Of Liabilities Mattersmentioning

confidence: 99%

Some New Perspectives on India's Approach to Capital Account Liberalization

Prasad¹

2009

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In this paper, I analyze India's approach to capital account liberalization through the lens of the new literature on financial globalization. India's authorities have taken a cautious and calibrated path to capital account opening, which has served the economy well in terms of reducing its vulnerability to crises. By now, the capital account has become quite open and reversing this is not a viable option. Moreover, the remaining capital controls are rapidly becoming ineffective, making the debate about capital controls rather moot. Managing de facto financial integration into international capital markets and aligning domestic macroeconomic policies in a manner that maximizes the indirect benefits and reduces the risks is the key challenge now facing India's policymakers on this front.

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Ready for capital account convertibility?

Cited by 16 publications

References 34 publications

Thresholds in the process of international financial integration

Thresholds in the process of international financial integration

Important dynamic indices in spatial models*

Some New Perspectives on India's Approach to Capital Account Liberalization

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