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This paper analyzes the experiences of emerging market economies (EMEs) that have liberalized capital flows over the past 15 years with respect to macroeconomic performance and risks to financial stability. The results of the panel data regressions indicate that greater openness to capital flows is associated with higher growth, gross capital flows, and equity returns and with lower inflation and bank capital adequacy ratios. The effects vary depending on thresholds. As a potential application of these findings, the paper explores the possible effects of liberalization on China by applying the coefficients of explanatory variables to the corresponding variables of China in 2012–16.

Finance --- Business & Economics --- International Finance --- Capital movements --- Economic development --- E-books --- Banks and Banking --- Exports and Imports --- Finance: General --- 'Panel Data Models --- Spatio-temporal Models' --- Current Account Adjustment --- Short-term Capital Movements --- General Financial Markets: Government Policy and Regulation --- Other Economic Systems: Public Economics --- Financial Economics --- International Investment --- Long-term Capital Movements --- Financial Institutions and Services: Government Policy and Regulation --- Interest Rates: Determination, Term Structure, and Effects --- International economics --- Financial services law & regulation --- Capital account liberalization --- Capital flows --- Capital adequacy requirements --- Financial sector risk --- Real interest rates --- Balance of payments --- Financial regulation and supervision --- Financial sector policy and analysis --- Financial services --- Asset requirements --- Financial risk management --- Interest rates --- China, People's Republic of --- Panel Data Models --- Spatio-temporal Models