20240229-IMF-Do_Capital_Inflows_Spur_Technology_Diffusion_Evidence_from_a_New_Technology_Adoption_Index_49页_3mb

The paper examines the impact of capital inflows and financial liberalization on technology diffusion in emerging and low-income countries (EMDEs) using a novel Embodied Technology Imports Indicator (ETI). The ETI, based on patent data and trade information, measures technological sophistication in machinery imports.

The study employs a local projection difference-in-differences approach with capital account liberalization episodes, identifying that liberalization increases foreign direct investment (FDI) flows by 28-33% and the ETI by 7-9 percentage points over 5-10 years. This leads to a 9-12 percentage-point rise in GDP per capita PPP.

Robustness checks confirm these findings across various specifications, including control for trade barriers, economic conditions, and alternative technology measures.

Overall, the research suggests that opening capital accounts fosters technology adoption, contributing to economic growth in EMDEs.