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Who Benefits from Capital Account Liberalization? Evidence from Firm-Level Credit Ratings Data
Author: Mr. Alessandro Prati, Mr. Martin Schindler, and Mr. Patricio A Valenzuela
Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 210
Language:
English
Publication Date:
01 Sep 2009
DOI:
https://doi.org/10.5089/9781451873573.001
ISBN:
9781451873573
ISSN:
1018-5941
Pages:
34
Keywords:
WP; foreign currency; capital; rating
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We provide new firm-level evidence on the effects of capital account liberalization. Based on corporate foreign-currency credit ratings data and a novel capital account restrictions index, we find that capital controls can substantially limit access to, and raise the cost of, foreign currency debt, especially for firms without foreign currency revenues. As an identification strategy, we exploit, via a difference-in-difference approach, within-country variation in firms' access to foreign currency, measured by whether or not a firm belongs to the nontradables sector. Nontradables firms benefit substantially more from capital account liberalization than others, a finding that is robust to a broad range of alternative specifications.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund