Saborowski, Christian. (2011) Can financial development cure the Dutch disease? International Journal of Finance & Economics, Vol.16 (No.3). pp. 218-236. ISSN 1099-1158

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Abstract

We argue that, in improving the efficient allocation of resources, financial sector development should dampen the appreciation effect of capital inflows. Using dynamic panel data techniques, the paper finds that the exchange rate appreciation effect of FDI inflows is indeed attenuated when financial and capital markets are larger and more active. The main implication of these results is that one of the main dangers associated with large capital inflows in emerging markets-the destabilization of macroeconomic management due to a sizeable appreciation of the real exchange rate-can be mitigated partly by means of developing a deep financial sector.

Item Type:	Journal Article
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Capital movements, Economic stabilization, Investments, Foreign
Journal or Publication Title:	International Journal of Finance & Economics
Publisher:	John Wiley & Sons, Ltd.
ISSN:	1099-1158
Date:	July 2011
Volume:	Vol.16
Number:	No.3
Page Range:	pp. 218-236
Identification Number:	10.1002/ijfe.419
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/38729

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