Capital Account Liberalization and Economic Growth: New Measures, New Estimates and the Experience of South Korea

This book examines the economic effects of capital account liberalization on economic growth. The first essay investigates the growth effects of financial opening, using cross-country regressions and a new measure for capital account openness. The second essay studies whether financial opening and foreign capital inflows eased financing constraints and made investment more efficient in Korea. There is no evidence that capital account liberalization promotes long-term growth and made the Korean financial market in the 1990s. In the last essay, the historical development of capital controls, capital account liberalization and the 1997 financial crisis in Korea is examined from the political economy perspective. The Korean experience demonstrates the important role of capital controls for national development and the danger of careless financial opening. This study critically evaluates the mainstream support for financial globalization and emphasizes an alternative development strategy.