The Origins of Financial Openness: A Study of Current and Capital Account Liberalization

Financial Openness and Productivity

“…6 Nevertheless, it is still conceivable that governments would push for liberalization because they recognize the growing need for capital in their economies or that it is exactly those countries with the right mix of institutions that liberalize. Research on the causes of financial liberalization (see, e.g., Quinn & Inclan (1997)) mostly finds that they are entirely politically driven. 7 It is still possible that the liberalization variable captures effects of other reforms happening simultaneously.…”

The Globalization of Liberalization: Policy Diffusion in the International Political Economy

“…The first is liberalization of the current account, which includes foreign debt repayment and payment for goods, services, and invisibles (see Simmons 2000). The second is liberalization of the capital account, or the removal of taxes, quotas, or other rules that discourage the free movement of investment funds into and out of a country (Quinn and Inclan 1997). The third policy is the unification of the exchange rate, or eliminating multiple or tiered systems that can be used to discriminate against particular kinds of transactions or particular trading partners (Reinhart and Rogoff 2002).…”

The determination of capital controls: Which role do exchange rate regimes play?

“…If Leftist parties draw support mainly from the labor class, while Rightist parties tend to receive support from capital owners, leftwing governments are more likely to tax capital incomes and, for this purpose, to impose capital controls than right-wing governments (Quinn and Inclán, 1997;Epstein and Schor, 1992). Since capital controls help maintain the tax base for both capital levies and the inflation tax, governments with difficulties in financing their expenditures from other revenue sources may find them useful in managing public finance.…”

“…Some studies use a more refined measure of capital account openness proposed by Quinn (1997), which is based on a careful reading of national regulations on international capital transactions and a differentiated coding of various degree of capital control intensity (Quinn and Inclán, 1997;Dailami, 2001). Most recent studies take advantage of a much more detailed classification of capital transactions by the IMF, and use the disaggregated information about the existence of controls on each category to construct almost continuous indices for the intensity of capital controls (Johnston and Tamirisa, 1998).…”

“…Several studies include variables reflecting partisan conflicts as determinants of capital controls and find that left-wing governments and majority governments are more likely to impose capital controls (Alesina et al, 1994;Quinn and Inclán, 1997). Many studies find that distortions in the tax system, especially its low efficiency, are a common determinant of capital controls (Milesi-Ferretti, 1998;Dailami, 2001).…”