TY  - RPRT
        AU  - Kose, M. Ayhan
AU  - Prasad, Eswar
AU  - Terrones, Marco E.
        TI  - Does Openness to International Financial Flows Contribute to Productivity Growth?
        PY  - 2008/Aug/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 3634
        UR  - https://www.iza.org/publications/dp3634
        AB  - Economic theory has identified a number of channels through which openness to international financial flows could raise productivity growth. However, while there is a vast empirical literature analyzing the impact of financial openness on output growth, far less attention has been paid to its effects on productivity growth. This paper provides a comprehensive analysis of the relationship between financial openness and total factor productivity (TFP) growth using an extensive dataset that includes various measures of productivity and financial openness for a large sample of countries. We find that de jure capital account openness has a robust positive effect on TFP growth. The effect of de facto financial integration on TFP growth is less clear, but this masks an important and novel result. We find strong evidence that FDI and portfolio equity liabilities boost TFP growth while external debt is actually negatively correlated with TFP growth. The negative relationship between external debt liabilities and TFP growth is attenuated in economies with higher levels of financial development and better institutions.
        KW  - external assets and liabilities
KW  - debt
KW  - capital account liberalization
KW  - portfolio equity
KW  - capital flows
KW  - financial openness
KW  - total factor productivity
KW  - foreign direct investment
        ER  -