How Does Financial Openness Affect Economic Growth and its Components?

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims at uncovering the different channels through which de facto financial openness affects economic growth and its components. The results herein indicate that de facto measures of financial openness (as proxied by different types of capital inflows) stimulate economic growth. In particular, the results indicate that higher levels of FDI inflows stimulate GDP per worker growth and crowd-in domestic investment for developing and emerging markets. As far as developed economies, I find that higher levels of both FDI and Portfolio-type inflows improve GDP per worker growth, but that only the latter type of capital stimulates capital accumulation with crowding-in effects. The one similarity between developed and developing economies is that FDI positively affects total factor productivity in both cases.

Keywords: Capital account liberalization; capital flows; dynamic panels; foreign direct investment; total factor productivity (search for similar items in EconPapers)
JEL-codes: C23 F21 F36 F41 F43 O40 (search for similar items in EconPapers)
Date: 2009-07-14
New Economics Papers: this item is included in nep-fdg and nep-opm
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20099

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