Capital account liberalization and its effects on economic growth and financial instability: the exante orthodox models were wrong

Vol. 40 No. 4 (2020)

Oct-Dez/2020
Published October 23, 2020
PDF-English
PDF-English

How to Cite

Garcia Angelico, Diego, and Giuliano Contendo de Oliveira. 2020. “Capital Account Liberalization and Its Effects on Economic Growth and Financial Instability: The Exante Orthodox Models Were Wrong”. Brazilian Journal of Political Economy 40 (4):669-88. https://doi.org/10.1590/0101-31572020-3027.

Capital account liberalization and its effects on economic growth and financial instability: the exante orthodox models were wrong

Diego Garcia Angelico
Doctoral student at Instituto de Economia da Universidade de Campinas – IE/Unicamp and researcher at Centro de Estudos de Relações Econômicas Internacionais – Ceri – IE/Unicamp, Campinas/SP, Brasil.
Giuliano Contendo de Oliveira
Professor at Instituto de Economia da Universidade de Campinas - IE/Unicamp and researcher at Centro de Estudos de Relações Econômicas Internacionais - Ceri – IE/Unicamp, Campinas-SP, Brasil.
Brazilian Journal of Political Economy, Vol. 40 No. 4 (2020), Oct-Dez/2020, Pages 669-688

Abstract

The financial crises in emerging economies during the 1990s and 2000s propelled academia and multilateral institutions to investigate whether the promised benefits of capital account liberalization were being delivered or not. In the course of empirical studies on the subject, many ex ante theoretical assumptions on financial globalization were demystified, and previously unknown risks and dysfunctions began to be evidenced. This article analyzes the main empirical studies on the effects of financial globalization published in the last two decades and shows that the main conventional assumptions that were built to theoretically base the capital account liberalization processes that occurred in the 1980s and 1990s were wrong. 

JEL Classification: F3; F4; F6.


Keywords: Financial globalization capital account liberalization mainstream economics financial instability emerging economies