Innovation

Who Benefits From Capital Account Liberalization? Evidence From Firm-Level Credit Ratings Data

Date Added: Sep 2009
Format: PDF

This paper provides 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, the author finds 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, the author exploits, 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.