The effects of capital account openness on economic growth and its underlying mechanisms are empirically investigated in this study using panel data from emerging market economies between 1980 and 2022. The study reveals a significant "inverted U-shape" relationship between capital account openness and economic growth in these markets: moderate openness boosts growth, while extreme openness may impede it. Further analysis identifies a "financing promotion—risk accumulation" pathway, with short-term external debt serving as a crucial mechanism. Moreover, effective institutions are found to mitigate the negative impacts of excessive openness. The findings offer valuable guidance for China’s "Fifteenth Five-Year Plan," emphasizing the need to strike a balance between openness and stability.
Liu et al. (Sun,) studied this question.