Many crises later, the view has somewhat shifted, in particular, regarding emerging markets and developing countries, which is the group of countries that I will focus my remarks on. Not only can capital flow reversals and in the extreme form sudden stops create significant costs in terms of output losses, financial instability and even political instability.
But from all we know today it is surprisingly difficult to find empirical evidence of capital account liberalization being beneficial in terms of output gains, investment, productivity gains, or risk sharing for countries that have not progressed sufficiently far in their institutional development.