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Opposition to Capital Market opening
Engler, Philipp ;  Wulff, Alexander ;  Universität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft

Main titleOpposition to Capital Market opening
AuthorEngler, Philipp
AuthorWulff, Alexander
InstitutionUniversität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft
No. of Pages27 S.
Series Discussion paper / School of Business & Economics ; 2011/17 : Economics
KeywordsCapital flows; international financial integration; growth; neoclassical model; heterogenous agents
Classification (DDC)332 Financial economics
337 International economics
AbstractWe employ a neoclassical growth model to assess the impact of
financial liberalization in a developing country on capital owners` and
workers` consumption and welfare. We find in a baseline calibration
for an average non-OECD country that capitalists suffer a 42 percent
reduction in permanent consumption because capital inflows reduce
their return to capital while workers gain 8 percent of permanent con-
sumption because capital inflows increase wages. These huge gross
impacts contrast with the small positive net effect found in a neoclas-
sical represent agent model by Gourinchas and Jeanne (2006). We
further show that the result for capitalists is insensitive to enhanced
productivity catch-up processes induced by capital inflows. Our find-
ings can help explain why poorer countries tend to be less financially
open as capitalists` losses are largest for countries with the lowest
capital stocks, inducing strong opposition to capital market opening.
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FU DepartmentDepartment Business and Economics
Other affiliation(s)Lehrstuhl für Geldtheorie und Geldpolitik
Year of publication2011
Type of documentBook
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Created at2011-09-26 : 10:17:32
Last changed2014-01-23 : 04:20:18
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