Would Capital Account Liberalization Promote Economic Growth in the Long Term？——Research Based on the Neoclassical Growth Theory
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Abstract By introducing the degree of capital account liberalization into the neoclassical growth model and using the factor of interest rate difference, this paper finds that what impacts the economic growth is not the degree of capital account liberalization itself, which has received a lot of controversies, but the extent of change in it. By analyzing panel data of 181 countries and regions from 1980 to 2013 while adopting methods of limited information maximum likelihood (LIML) to solve the problems of endogeneity and weak instrumental variables, this paper tests the theoretical hypothesis and further discovers that the extent of rise in degree of capital account liberalization significantly explains the rate of economic growth and those emerging market countries enjoy greater economic growth. In addition, the effect of population policy and fiscal policy on economic growth in OECD countries and emerging market countries are opposite. Therefore, China should not depend on the short-term effect of capital account liberalization, but instead, improve investment efficiency through structural reform in capital market. Meanwhile, moderately loosening the family planning policy will help avoid lowering the status in international division of labor caused by comparative advantage of excessively low cost of labor, and build a convenient platform of trade and investment by offering more public supplies.
CHEN Jing-Yu. Would Capital Account Liberalization Promote Economic Growth in the Long Term？——Research Based on the Neoclassical Growth Theory. Economic Survey, 2017, 34(5): 062.
2017, Vol. 34 
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