Does democracy promote capital account liberalization?

Steinberg, David A.; Nelson, Stephen C.; Nguyen, Christoph

doi:10.1080/09692290.2018.1486725

Cited by 10 publications

(14 citation statements)

References 66 publications

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“…The political economy literature that investigates why countries have diverged in regard to the level of capital controls can be divided into four approaches, depending on their key explanatory variable. The institutionalist approach evaluates, for instance, the impact of political regimes on capital account policies, finding a negative relationship between the levels of democracy and financial openness (Eichengreen and Leblang 2008;Milner and Mukherjee 2009;Steinberg et al 2018). This relationship is based on different mechanisms.…”

Section: Literature Reviewmentioning

confidence: 99%

The Political Economy of Intermediate Capital Account Regimes: a Fuzzy-Set Qualitative Comparative Analysis

Silva

2022

St Comp Int Dev

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Contrary to expectations, the global push for liberalizing reforms during the 1980s and 1990s did not abolish policy diversity in regard to capital flow management. Even though many countries fully opened their capital accounts, there remain several examples of divergence, which go from the maintenance of high levels of capital controls to partial liberalization. Against this background, relying on data from 84 countries between 1995 and 2017, this article uses fuzzy-set qualitative comparative analysis (fsQCA) to shed light on the conditions underlying different capital account regimes. In line with the Polanyian theoretical framework, findings reveal that two kinds of causal paths paved the way for intermediate regimes: the statist path was followed by right-leaning authoritarian regimes that attempted to combine the integration into global markets with the maintenance of control over the domestic private sector; the pluralist path was observed where either manufacturing industries or popular sectors were strong enough to motivate the reregulation of capital flows. Conversely, findings show that extreme regimes such as open and closed ones were associated with homogenous conditions like, respectively, leftist authoritarian regimes and rich democracies with stable economies.

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Section: Literature Reviewmentioning

confidence: 99%

The Political Economy of Intermediate Capital Account Regimes: a Fuzzy-Set Qualitative Comparative Analysis

Silva

2022

St Comp Int Dev

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“…Regarding the institutions, for instance, different authors conclude that autocratic political regimes tend to impose higher levels of capital controls due to three main reasons (Eichengreen & Leblang, 2008;Haggard & Maxfield, 1993;Milner & Mukherjee, 2009;Steinberg et al, 2018). First, the liberalization of capital outflows would concede an ability of exit to domestic private capitalists, weakening authoritarian regimes (Dailami, 2000;Hirschman, 2013).…”

Section: Literature Reviewmentioning

confidence: 99%

The reregulation of capital flows in Latin America: assessing the impact of post-neoliberal governments

Silva

2021

Review of International Political Economy

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This article assesses the impact of post-neoliberal governments on the level of capital controls in 17 Latin American countries for the period between 1995 and 2017. Contrary to administrations led by other left-of-center parties, especially the ones affiliated to the Socialist International, I contend that post-neoliberal parties, affiliated to the São Paulo Forum, opted to reregulate capital flows for three main reasons: increasing macroeconomic policy autonomy, favoring their constituencies, and/or giving concreteness to the rhetoric against financial and foreign interests. After proposing a new capital controls index and estimating a time-series cross-section model, I find that post-neoliberalism has been associated with an increase in the level of controls. Besides this main conclusion, I also find that larger financial sectors contribute to counteracting the reregulation of capital flows by post-neoliberal governments.

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“…We explore empirically the effect of export diversification on financial openness by relying on the existing studies on the macroeconomic determinants of financial openness (e.g., Grilli and Milesi-Ferreti, 1995;Gnangnon, 2019;Joyce and Noy, 2008;Karcher and Steinberg, 2013;Quinn and Inclan, 1997;Steinberg et al, 2018;Vo and Daly, 2007) and considering control variables that would potentially influence the effect of export diversification on financial openness. Thus, control variables introduced in the baseline model are the real per capita income, denoted "GDPC", which is a proxy for countries' development level; the population size, denoted "POP", which represents the country's size, that is, the domestic market size; the inflation rate, denoted "INFL"; the level of trade openness, denoted "OPEN"; the level of human capital accumulated, denoted "HUM"; and the level of democracy, denoted "DEM", which concurrently acts as a proxy for the institutional and governance quality.…”

Section: Model Specificationmentioning

confidence: 99%

“…Rich and well-educated countries tend to experience a greater financial integration, and hence enjoy a greater financial openness (e.g., Edison et al 2002;Joyce and Noy, 2008;Prasad et al 2003;Steinberg et al, 2018;Vo and Daly, 2007). Olson (1982) has argued that real per capita income may affect capital account liberalization if lower income per capita results in a fall in the demand for capital protection.…”

Section: Model Specificationmentioning

confidence: 99%

“…The current paper aims to fill this gap in the literature. It intends to contribute to the existing literature on the macroeconomic determinants of financial openness by investigating whether 2 Studies include for example Grilli and Milesi-Ferreti (1995); Gnangnon (2019); Joyce and Noy (2008); Karcher and Steinberg (2013); Obstfeld (1998); Quinn and Inclan (1997); Steinberg et al (2018); Vo and Daly (2007); and Von Furstenberg (1998). 3 Studies on this matter include for example, Anand et al (2012); Gnangnon (2020a;2020b); Haddad et al (2013); Hausmann et al (2007); Kramarz et al (2020); McIntyre (2018); Mishra et al (2011); Redding (1999); Stojkoski et al (2016) and Vannoorenberghe et al (2016).…”

Section: Introductionmentioning

confidence: 99%

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Export Diversification and Financial Openness

Sk¹

2020

Preprint

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This paper investigates empirically the effect of export diversification (i.e., both export product diversification and services export diversification) on financial openness, using a sample of 119 countries (including both developed and developing countries) over the period 1985-2014. Based on the Blundell and Bond's two-step system Generalized Methods of Moments, the analysis has revealed that both export product diversification and services export diversification influence positively financial openness. However, this outcome hides differentiated effects across countries in the full sample. Specially, countries with a very high real per capita income experience a positive effect of export concentration on financial openness, while for countries with a relatively lower per capita income, it is rather export diversification that drives positively financial openness. Interestingly, the effect of export diversification on financial openness depends on the size of external shocks that affect domestic economies, as well as countries' economic growth performance. Overall, these findings add to the empirical literature on the effect of international trade on financial openness by showing that both export product diversification and services export diversification matter for financial openness.

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Does democracy promote capital account liberalization?

Cited by 10 publications

References 66 publications

The Political Economy of Intermediate Capital Account Regimes: a Fuzzy-Set Qualitative Comparative Analysis

The Political Economy of Intermediate Capital Account Regimes: a Fuzzy-Set Qualitative Comparative Analysis

The reregulation of capital flows in Latin America: assessing the impact of post-neoliberal governments

Export Diversification and Financial Openness

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