CAPITAL MOBILITY IN DEVELOPING-COUNTRIES - SOME MEASUREMENT ISSUES AND EMPIRICAL ESTIMATES

A fundamental determinant of the macroeconomic properties of an econom y is its degree of financial integration with the outside world. Yet v ery little is known about this characteristic of many developing econo mies. An important stumbling block in the empirical assessment of fina ncial integration is the multiplicity of approaches to measurement. Th is article describes and evaluates alternative tests of capital mobili ty and applies four such tests to assess the degree of integration wit h external financial markets exhibited by a large group of developing countries in recent years. The evidence suggests that a substantial nu mber of developing countries can be considered financially open.