Can Developing Countries Benefit from Capital Liberalization?
Resource
國家發展研究, 8(1), 091-129
Journal
國家發展研究
Journal Volume
8
Journal Issue
1
Pages
091-129
Date Issued
2008-12
Date
2008-12
Author(s)
Tseng, M.Y.
Abstract
Capital liberalization is an important policy option in developing countries. There is no difficulty in finding empirical evidence in support of a positive correlation between the openness of capital account and economic growth. A great number of studies conclude low linkage or even negative effects though. An overlapping generation model is built in this paper to derive the effects of capital liberalization on per capita income and consumption. In addition, the relationship between economic parameters and speed of adjustment are also unveiled. A model calibration exercise has been done on the basis of Taiwan's economic data. Several findings can be concluded as following: First, whether capital liberalization in a developing country lifts up its per capita income and consumption or not, lies heavily in the efficiency of its financial market. This result echoes the proposition that the issue of optimal sequencing can not be left aside in the process of economic liberalization. Second, income and consumption per efficient unit of labor may not decline in the case of capital outflow as long as the magnitude of increase in domestic interest rate that follows is lower than that of capital outflow. Third, the degree of capital openness in a developing country can only exert a minor impact on the speed of adjustment toward the new steady state. Therefore, it takes a long time for the effects of liberalization to be fully materialized. Last but not least, a higher output elasticity of capital implies a lower rate of adjustment. This result lends support to the convergence theory initiated by most development economists.
Subjects
資本自由化
收斂??
穩定?態
調整速?
自由化順序
capital liberalization
convergence theory
steady state
speed of adjustment
sequencing of liberalization
SDGs
Type
journal article