Capital market openness and output volatility

Kwang Myoung Hwang, Donghyun Park, Kwanho Shin

    Research output: Contribution to journalArticlepeer-review

    14 Citations (Scopus)

    Abstract

    In this paper, using data from 21 advanced and 81 developing countries during 1971-2010, we empirically examine the impact of capital market openness on output volatility. We find that opening of capital markets increases the output volatility of developing countries. Furthermore, we find that the main channel through which capital market openness increases volatility is currency and external-debt crisis. Finally, we find that while Asian countries are less likely to experience a crisis, they become even more unstable than other developing countries once a crisis occurs. Our evidence strengthens the case for caution in developing countries' opening up of their capital markets.

    Original languageEnglish
    Pages (from-to)403-430
    Number of pages28
    JournalPacific Economic Review
    Volume18
    Issue number3
    DOIs
    Publication statusPublished - 2013 Aug

    ASJC Scopus subject areas

    • Economics and Econometrics

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