There is also little systematic evidence that financial opening raises welfare indirectly by promoting collateral reforms of economic institutions or policies. At the same time, opening the financial account does appear to raise the frequency and severity of economic crises (Obstfeld, 2009). The evidence appears to favour a hierarchy of capital flows.
While the liberalisation of equity flows seems to enhance growth prospects, the evidence that the liberalisation of debt flows is beneficial to the EMEs is ambiguous (Henry, 2007; Committee on Global Financial System (2009)). Reversals of capital flows from the EMEs, as again shown by the current financial crisis, are quick, necessitating a painful adjustment in bank credit, and collapse of stock prices.