When Does Capital Account Liberalization Help More than It Hurts?

The world economy needs a growth-lifting strategy, and infrastructure financing seems to hold the key. Based on the New Structural Economics (Lin, 2010; 2012) we discuss the heterogeneity of capital focusing on the long-term versus short-term orientation (STO). Traditional neoliberalism assumes that capital is homogenous, complete capital account liberalization is “beneficial”.However, previous studies have found evidence of long-term orientation (LTO) in the culture of many Asian economies (Hofstede, 1991). In this exploratory paper, we suggest that the LTO can be considered a special endowment which, under certain circumstances, can be developed into a comparative advantage (CA) in patient capital. If these countries can turn their latent CA into arevealed CA in patient capital, and develop the ability to “package” profitable and non-profitable projects in meaningful ways, they would have a “revealed” competitive advantage in infrastructure financing. The ability to “package” public infrastructure and private services is one of the key institutional factors for success in overseas cooperation.

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Does Capital Account Liberalization Discipline Budget Deficit?

Review of International Economics ◽

10.1046/j.1467-9396.2003.00420.x ◽

2003 ◽

Vol 11 (5) ◽

pp. 830-844 ◽

Cited By ~ 18

Author(s):

Woochan Kim

Keyword(s):

Budget Deficit ◽

Capital Account ◽

Capital Account Liberalization

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Capital Account Liberalization and Firm Innovation: Worldwide Evidence

Journal of Accounting Auditing & Finance ◽

10.1177/0148558x211059401 ◽

2021 ◽

pp. 0148558X2110594

Author(s):

Fangfang Hou ◽

Xinpeng Xu

Keyword(s):

Positive Impact ◽

Set Covering ◽

Capital Account ◽

Legal Environment ◽

Firm Level ◽

Firm Innovation ◽

Capital Account Liberalization ◽

Data Set ◽

Innovation Output

This study investigates whether capital account liberalization, a leading characteristic of globalization, is associated with firms’ future innovation output. Employing a novel firm-level panel data set covering 41 countries over two decades, we show that capital account liberalization is significantly associated with higher corporate patenting activities, particularly for firms from innovation-intensive industries. Further analyses show that the effect is stronger among firms from economies in a better legal environment, signifying the important role of good institutional quality in facilitating the positive impact of liberalization. The effect is also stronger among firms with higher initial productivity, consistent with the “productivity” hypothesis, according to which bigger and more productive firms generate more innovation after liberalization. Our findings are robust to the use of various measurements, subsamples, and estimation models. This study provides global firm-level evidence of the real economic impact of financial globalization.

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