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Capital Controls and International Development: A Theoretical Reconsideration
Author(s) -
Sheng Li
Publication year - 2014
Publication title -
global policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.602
H-Index - 33
eISSN - 1758-5899
pISSN - 1758-5880
DOI - 10.1111/1758-5899.12081
Subject(s) - openness to experience , economics , capital account , capital (architecture) , volatility (finance) , capital deepening , monetary economics , capital flows , liberalization , capital accumulation , capital outflow , physical capital , fixed capital , capital formation , financial capital , macroeconomics , international economics , market economy , financial economics , human capital , psychology , social psychology , archaeology , history
This survey article develops a stochastic framework to analyze capital inflows and outflows and to illustrate how a developing economy can determine its level of capital account openness and simultaneously balance concerns regarding economic growth and volatility. We find that rapid economic growth inevitably causes fluctuations in a financially immature economy that has a high level of capital account openness. We identify a conflict of interest between capital‐rich and capital‐importing economies when capital account liberalization is promoted by the former.