Capital Account Liberalization and Economic Growth: GMM System Analysis

Abstract

The aim of this paper is to determine the correlation between capital account liberalization and economic growth. We are particularly interested in a qualitative indicator to measure this process. Our empirical study was conducted on a sample of 60 developed and developing countries covering the period 1984 to 2007. Referring to the dynamic panel model, our econometric results reveal a direct correlation between the capital account liberalization and economic growth which can be either positive or negative due to the sample selection and the study period. This leads us to predict the capital account opening is a sine qua non for initiating economic growth.