After the opening up, developing countries have gained less benefits than developed countries in increasing investment, improving the efficiency of resource allocation and increasing policy constraints. Therefore, developing countries must have certain macroeconomic and micro-financial conditions to open capital projects.
Keywords: capital account opening, economic growth, financial deepening
Under the framework of theoretical analysis, open capital projects will promote economic growth by improving the efficiency of resource allocation, increasing risk diversification and promoting financial development. At the annual meeting of Hong Kong 1997, Fischer, then managing director of the IMF, also proposed that "capital account liberalization will become the core work of the IMF". However, in empirical research, although some empirical studies believe that opening the capital account can significantly promote economic growth, some empirical studies have come to the opposite conclusion. Bazwati (1998) even thinks that "the benefits of opening the capital account are embodied in theory rather than in practice". This paper aims to sort out the empirical research on the relationship between capital account opening and economic growth by foreign scholars in recent 10 years, and analyze the reasons for the differences in empirical research in order to get new enlightenment.
First, the measurement index of capital account openness
Indicators to measure the openness of capital account can be divided into two categories. One is to quantitatively measure the actual effect of capital account opening (or control). Commonly used indicators include: comparison of national savings rate and investment rate, interest rate difference, actual capital inflow, etc. These indicators are not commonly used in empirical tests for many reasons, such as difficulty in obtaining data, or interest rate control, or the actual inflow of capital is affected by the international environment. Another kind of indicator is to measure the degree of capital account openness qualitatively according to the Annual Report on Exchange Rate Arrangements and Foreign Exchange Control (AREAER) issued by IMF. Previous studies mostly used the variable "0/ 1" to measure the openness of capital account (for example, grilli, Milesi Fereti, 1995). The disadvantage of this method is that it is difficult to reflect the real situation of a country's capital account. Based on this, some scholars put forward new measurement indicators, which have become the mainstream indicators in the study of the correlation between capital account opening and economic growth. Qualitative measurement indicators mainly include:
(1) Quinn index. Quinn index was put forward by Ouinn( 1997), and Quinn set the score range of capital account opening at 0-4, including 2 points for the exchange of inflow capital and outflow capital. The criteria are: "0" means that capital account convertibility is completely restricted, "0.5" means that capital account convertibility needs examination and approval, "1" means that capital account convertibility needs permission, but heavy taxes are levied, "1.5" means that capital account convertibility is completed by market mechanism, with light taxes, and "2" means that capital account convertibility is completely free. According to this principle, the openness of a country's capital account can be obtained, and the change of openness can be measured by "△ Quinn". Compared with the "0/ 1" variable measurement method, the Quinn index more accurately measures the intensity of capital account opening.
(2) sharing. According to the Annual Report on Exchange Rate Arrangements and Foreign Exchange Control issued by IMF, the number of years a country's capital account is open and shared during the whole observation period. Table 1 is Klein &; Olivier (1999) (hereinafter referred to as K-O) measures the openness of some national capital projects from 1986- 1995 according to the data published by AREAER. Compared with Quinn index, share index reflects the share of time when a country's capital account is completely open. Take Finland as an example. Finland opened its capital account on 1992. Therefore, the share value between 1986- 1995 is 5/ 10 = 0.5.
Table 1 openness of capital account in some countries (1986- 1995)
Share value
Opening hours of capital projects
developed countries
developing country
0. 1
1995
Norway
Costa Rica, Nigeria
0.2
1994- 1995
Spain
Trinidad and Tobago i.
0.3
1993- 1995
Portugal, Sweden
Honduras, Peru
0.4
1992- 1995
Ireland
0.5
199 1- 1995
Finland, Austria
0.6
1990- 1995
France, Italy
1988-92, 1995
Ecuador
0.7
1989- 1995
Guatemala
1986- 1992
Uruguay
0.8
1988- 1995
Denmark
0.9
1987- 1995
Japan
1.0
1986- 1995
Australia, Belgium, Canada, Japan, New Zealand, Britain and the United States.
Bolivia, Indonesia, Malaysia, Maldives, Panama
Source: Klein &; Olivier (1999).
Recently Edison &; Warnock(2003) (hereinafter referred to as E-W) put forward a new method to measure the degree of capital liberalization from the perspective of securities investment. Two securities market data released by International Finance Corporation (1FC): (1) Global Index (IFCG), which represents the total amount of securities that can be traded in a country's capital market; (2) Investable index (1FCl), which represents the number of securities that foreign investors can participate in. E-W uses the ratio of IFCI to IFCG to reflect the participation of foreign investors in a country's securities market. E-W found that the openness of capital market measured by the openness of securities market has a high correlation with SHARE and Quinn.
Second, the empirical research summary of the correlation between capital account opening and economic growth
Table 2 is an empirical study on capital account opening and economic growth by foreign scholars in recent years. Quinn (1997) proved for the first time that there is a positive correlation between Quinn index and per capita GDP growth. Quinn's research sample includes 58 countries, including Latin American countries 16, Southeast Asian countries 6, OECD countries 20 and other countries 16. 1958 The average Quinn index of these countries is 2.3. Quinn's empirical research shows that there is a significant positive correlation between economic growth 1960- 1989 and △Quinn 1958- 1988 in these countries.
K-O came to this conclusion indirectly. K-O confirmed for the first time that capital account opening promotes financial deepening, and took "share" as the measure of capital account opening, and used the ratio of current liabilities///GDP(LLY), non-financial private sector claims //GDP(PRIVY), domestic assets of commercial banks and total domestic assets of banking system (including central bank) (banks) to measure financial deepening. Based on the data of 93 countries (1986- 1995), the empirical study on K-O shows that the opening of capital account is significantly positively correlated with ALLY and A Privacy, which confirms that the above financial deepening indicators are positively correlated with economic growth. Although K-O indirectly draws the conclusion that capital account opening promotes economic growth, in the empirical study of sub-samples, K-O finds that capital account opening significantly promotes financial deepening in 20 OECD countries, but the effect is not obvious in the sub-samples of 18 South American countries.
Bekaert, Harvey, Lundblad (hereinafter referred to as B-H-L)(200 1) proved that the opening of capital account can promote economic growth. Because the opening of the securities market is an important part of the opening of capital projects, the opening of the securities market can not only reduce the cost of equity financing, but also improve corporate supervision and investment efficiency because of the entry of foreign investors. B-H-L proves that there is a positive correlation between the economic growth of 95 countries (1980- 1997) and the opening of the securities market. Even after the introduction of macroeconomic reform, financial reform, legal environment and banking crisis, the positive correlation is remarkable. B-H-L also draws a conclusion similar to K-O when using sub-sample analysis, that is, developed countries get more benefits through capital account opening than developing countries. Interestingly, Edwards (200 1) used 2 1 developed countries and 44 emerging market countries 197 1- 198.
Grilli and Milesi-Fereti (hereinafter referred to as G-M)( 1995) put forward for the first time that "open capital projects have no significant impact on economic growth". The empirical study of G-M takes the economic growth of countries from 1966 to 1989 every five years as the dependent variable, and the measures such as capital account opening "share", current account control, multiple exchange rate system, initial income, political variables and enrollment rate as the independent variables. The empirical results show that there is no significant positive correlation between share and economic growth.
Rodrik( 1998) takes the data of nearly 1000 countries (including developed and developing countries) as a sample, and takes "share" as a measure of capital account openness. On the premise of controlling other variables, such as per capita income at the beginning, secondary school enrollment rate and government,
Kraay( 1998) measures the openness of capital account in 64- 1 17 countries with share, 0uinn index and actual capital inflow respectively, and then makes regression analysis on the openness of capital account, population growth rate and secondary school enrollment rate with per capita GDP growth rate, GNP growth rate and per capita GDP level. The empirical results show that although the estimation coefficient of capital account opening is positive, even if the event analysis method is adopted, the promotion of capital account opening to economic growth is not significant.
In addition, Klein's (2003) empirical research holds that the relationship between capital account opening and economic growth is "inverted U", that is, within a certain income level (or per capita GDP), capital account opening can promote economic growth, while capital account opening in underdeveloped countries and rich countries may not necessarily promote economic growth. For underdeveloped countries, due to the lack of necessary domestic financial system, open capital projects may not promote the increase of domestic investment, while for rich countries, their financial systems can successfully convert residents' savings into investment.
Third, the reasons for the difference in the impact of capital account opening on economic growth.
Why is there such a big difference in empirical research on the same problem? The main reasons are as follows: (1) There are different indicators to measure the openness of capital projects, such as share, Quinn index or other indicators, and the correlation between these indicators is not high, such as Kraay( 1998) to17 countries1985-6544. (2) The samples are different, such as Quinn (1997) and Roderick (1998). The former sample not only contains fewer developing countries, but also does not include the "lost era" of1980s. The conclusion that the benefits of capital account liberalization in developing countries are less than those in developed countries has been confirmed by many empirical studies such as K-O, Edwards(200 1) and E-K. We are interested in why the role of capital account liberalization in economic growth varies from country to country. Generally speaking, open capital projects can promote economic growth in three ways: (1) increasing the chances of diversifying risks and attracting more capital inflows; (2) Improve the efficiency of resource allocation; (3) Strengthen domestic policy constraints (Kraay, 1998). We analyze the differences between these three ways in developed and developing countries in turn.
Table 3 International Capital Flows 1975- 1997
1975- 1982
1983- 1989
1990- 1997
foreign debt
Total water inflow
foreign debt
Total water inflow
foreign debt
Total water inflow
developed countries
3.328
3.352
3.926
4.756
4。 15 1
5.46 1
Emerging market countries
1. 1 16
2.573
1.0 19
1,470
0。 189
0.897
African countries
2.725
2.976
1.990
1.843
0,029
0.330
Asian country
1.707
2.60 1
1.020
1.6 16
1, 182
2.947
Underdeveloped European countries
2.260
2.023
0.338
0.520
0.7 19
1.855
Middle East countries
2.34 1
3. 129
1.402
1.990
0.525
-0.229
Latin America and the Caribbean
-2.380
1.930
-0.53 1
0.929
-0.458
0.562
Note: Source: Edwards (200 1). In the table, "foreign debt" refers to the ratio of debt capital inflow to GDP and "total capital inflow"
First of all, there is no clear causal relationship between capital account opening and capital inflow. Table 3 shows the flow of international capital from 1975 to 1997. 1975~ 1997, both developed countries and Latin American and Caribbean countries have higher capital account openness, but the total foreign debt and capital inflow of developed countries are higher than those of Latin American and Caribbean countries, and Asian countries that maintain more capital controls are more attractive to international capital.
Second, the differences of open capital projects in improving the efficiency of resource allocation. Compared with developed countries, developing countries have more financial repression and weaker financial and regulatory systems. Theoretically, the opening of capital account can alleviate domestic financial repression, promote the perfection of financial system and financial supervision, and thus improve the efficiency of resource allocation. The international capital introduced after the opening of the capital account is more of a "migratory bird" feature. Take the two financial crises in 1990s as an example. In 1993, 1993, the international capital flowed into Mexico to reach $23 billion, while in 1995,1400 million, showing a reversal of $37 billion. The same capital reversal is repeated in five East Asian countries (Thailand, Malaysia, Philippines, Indonesia and South Korea). 1996 the capital inflow of five east Asian countries is 40 billion dollars, while 1997 has a net outflow of 30 billion dollars, with a reversal amount of 70 billion dollars. This kind of capital flow similar to "animal spirit" is more about bringing economic fluctuations than improving the efficiency of resource allocation (Stiglitz, 2000).
Third, the policy is binding. According to Johnson &; The empirical analysis of Tamirisa( 1998) shows that two important purposes of implementing capital account control are to finance debt and gain policy autonomy. Under capital control, a government can finance its fiscal deficit through inflation tax, and it can also avoid the pressure of devaluation and appreciation of its own currency. The capital account is open, residents can hold foreign assets, and the potential threat of "currency substitution" Monetary authorities will face more constraints when implementing monetary and fiscal policies. The commonly used index to measure policy constraints is the inflation rate. However, the empirical test of Kraay( 1998) does not prove that the opening of capital account can significantly reduce the inflation rate. The fundamental reason is that the central banks in developing countries still lack independence, and the "weak finance" in developing countries also forces government authorities to continue to rely on inflation taxes. .
Four. conclusion
Eichengreen & ampLeblang(2002), after reviewing the hundred-year history of capital control, thinks that although capital control itself can't promote economic growth, when the financial crisis occurs, capital control can restrain the destructive effect of the crisis on the economy. Therefore, only when the domestic financial system is stable and the international financial environment is not prone to costly and destructive financial crises, the benefits of open capital projects may be greater than the costs. Many developing countries hope to attract more external capital inflows, increase domestic investment and promote economic growth by opening capital projects. However, open capital projects are like "putting the engine of a racing car on an old car". If you start the car without checking other parts of the car and training the driver, the effect is even worse than that before the installation of the classic car, because driving the classic car is slow but safe and reliable, and you may drive at a high speed after changing the engine, but it is more prone to accidents (Stizlitz, 2000). Therefore, only after the economic level and financial system have developed to a certain level can open capital projects promote financial deepening, improve the efficiency of resource allocation and increase the binding nature of policies, and ultimately promote economic growth.