Neoliberal economists and capital account liberalization in emerging markets

One of the most important developments in the world economy during the past three decades has been the willingness of governments in emerging markets to liberalize controls over international capital movements - a process known as capital account liberalization. What accounts for this trend? While existing research highlights a number of important factors, it neglects the role played by the rise and spread of neoliberal ideas that prioritized liberalization as a policy choice. Extending the literature on epistemic communities, I argue one critical mechanism shaping policy decisions is the formation of a coherent team of neoliberal economists. Using a new data set that codes the professional training of more than 1500 policymakers in emerging markets, I assess the relative importance of this argument quantitatively on a sample of twenty-nine emerging markets from 1977 to 1999. In order to assess the independent effect of neoliberal economists, I also take into account the endogeneity of the appointment process, assessing whether appointments are driven by credibility concerns, political interests, or economic conditions. I also stress that a fuller understanding of the appointment process necessitates a focus on the social environment in which appointments are situated.