“…Moreover, financial integration may result in a reduction or even complete elimination of capital constraints, permitting the economy to engage in a more productive investment (Acemoglu, Aghion, & Zilibotti, 2006;Acemoglu & Zilibotti, 1997). Additionally, capital account release may spur financial development (Baltagi, Demetriades, & Law, 2009;Klein & Olivei, 1999), as well as it contributes to more efficient business activities (Rajan and Zingales, 2003). On the top of that, an expectation is that more freedom in financial transactions contributes to a better risk diversification, thus, enhancing foreign investors to shift at least a part of their investments from safe and low-yield to risky but more profitable locations (Obstfeld, 1994;Sandri, 2010).…”