Capital Account Liberalization and External Debt
Downloads
This paper examines the impact of capital account liberalization on the external debt of South Mediterranean Countries (SMCs). We use 5 models to explain the growth of external debt by macroeconomics variables and especially by variables reflecting the capital liberalization. Using panel data for 8 countries from 1971 to 2015, we find that capital account liberalization is negatively correlated with external debt. We also find that the macroeconomic instability has an important role in the rise of external debt.
JEL Classification Numbers: F30; F36; F38; F41.
Akitoby B., Komatsuzaki T., and Binder A. (2014) “Inflation and Public Debt Reversals in the G7 Countries” IMF, WP/14/96, June 2014.
Bekaert G. and Harvey C.R. (2000) “Foreign speculators and emerging equity markets”. Journal of Finance, 55.
Begg, D. (1996), “Monetary Policy in Central and Eastern Europe; Lessons after Half a Decade of Transition”; Washington, D.C.: IMF, Working Paper, No. 96/108, September 1996.
Boyce J.K. (1992), “The revolving door? External debt and capital flight: A Philippine case study”. World Development, vol. 20, no. 3: 335–49.
Boyce, J. K. and L. Ndikumana, (2001) “Is Africa a net creditor? New estimates of capital flight from severely indebted sub-Saharan African countries, 1970-1996.” Journal of Development Studies, 38(2): 27-56.
Boyce J.K. and Ndikumana L. (2011b). “Capital Flight from sub-Saharan African Countries: Linkages with External Borrowing and Policy Options”. International Review of Applied Economics, 25 (2), 149-170.
Chipalkatti N. and Rishi M. (2001) “External Debt and Capital Flight in the Indian Economy” Oxford Development Studies, Vol. 29, No. 1, 2001.
Chinn M. D. and H. Ito. (2006). “What Matters for Financial Development? Capital Controls, Institutions, and Interactions”. Journal of Development Economics, Volume 81, Issue 1, Pages 163-192 (October).
Chinn M. D. and Ito H. (2016) “Notes on The Chinn-Ito Financial Openness Index 2014 Update”. The dataset is available at http://web.pdx.edu/~ito/Chinn-Ito_website.htm
Devereux M.B. and Philip R.L. (2001) “Exchange Rates and Monetary Policy for Emerging Market Economies” CEPR Discussion Paper, No. 2874.
Eichengreen, B. and Michael M. (1998), “Capital Account liberalization: Theoretical and Practical Aspects” Occasional Paper no. 1972, Washington, D.C.: IMF (August).
Gylfason T. (1991) “Inflation, Growth, and External Debt: A View of the Landscape”. The World Economy, 1991, vol. 14, issue 3, pages 279-297
Gibson H. and Vlassopoulos T. (2007) “Capital flows, capital account liberalization and the southern Mediterranean countries”. BNL Quarterly Review, vol. LX, no. 241, June 2007, pp. 137-65.
Gillet T., Wang M. M. (2016), “How would the external debt of five major emerging countries respond to financial tensions?”. Tresor-economics N 176, august 2016.
Henry, P.B., (2000) “Stock market liberalization, economic reform, and emerging equity market prices”. Journal of finance, 55.
IMF (2011), “Modernizing the Framework for Fiscal Policy and Public Debt Sustainability Analysis”, Fiscal Affairs Department and the Strategy, Policy, and Review Department; august 2011.
IMF (2013), “Staff Guidance Note for Public Debt Sustainability Analysis in Market-Access Countries”; The Strategy, Policy, and Review Department, May 2013.
Krugman, P., (1999) “Balance Sheets, the Transfer Problem, and Financial Crises” International Finance and Financial Crises — Essays in Honor of Robert P. Flood, Jr., Kluwer Academic Publishers, Dordrecht.
KoseM. A., PrasadE. S. and TerronesM. E. (2008) “Does Openness to International Financial Flows Raise Productivity Growth?” NBER Working Paper No. 14558 Issued in December 2008.
Lane P., and Milesi-Ferretti, G.M. (2001) “Long-Term Capital Movements”, NBER Macroeconomics Annual 2001, Cambridge, MA.
Manzocchi, S. (1997). “External Finance and Foreign Debt in Central and Eastern European Countries”. Washington, DC: International Monetary Fund.
McKinnon, Ronald I., (1973). Money and Capital in Economic Development, (Washington: The Brookings Institution).
McKinnon R.I. and Pill H. (1997) “Credible Economic Liberalizations and Overborrowing”. American Economic Review, 1997, vol. 87, issue 2, pages 189-93.
Reinhart, C, V Reinhart and K Rogoff (2012): “Public debt overhangs: advanced economy episodes since 1800”, Journal of Economic Perspectives, vol 26, no 3, Summer, pp 69–86.
Shaw, Edward, (1973). Financial Deepening in Economic Development, (New York: Oxford University Press).
Schmukler S. L., Vesperoni E. (2006) “Financial globalization and debt maturity in emerging economies”. Journal of Development Economics 79 (2006); 183 – 207.
Stulz R. M. (1999) “Globalization of equity markets and the cost of capital” SBF/NYSE Conference on Global Equity Markets.
Ostry J., Ghosh R., Kim I., and Qureshi S. (2010), “Fiscal Space”; IMF Staff position note, SPN/10/11; September 2010.
