Once such a distinction is recognised, empirical evidence suggests that opening the capital account within a given country consistently generates economically large and statistically significant effects, not only on economic growth, but also on the cost of capital and investment.
The beneficial impact is, however, dependent upon the approach to the opening of the capital account, in particular, on the policies in regard to liberalisation of debt and equity flows. Recent research demonstrates that liberalization of debt flows—particularly short-term, dollar-denominated debt flows – may cause problems.