We first constructed the index 20 years ago (Chinn and Ito, NBER WP No. 8967)! To see the website for the data.
Here is a map of financial openness in 2020 (normalized index, 1 to 0). The darker it is, the more open it is.
The description of the current dataset is Ito and Chinn (2022).
Hiro Itō and I constructed the index because there were few unique, widely available, constantly updated measures of financial openness at the time, except for Quinn’s (APSR1997) measure, which at the time had more limited coverage. Individual dummy variables based on those of the IMF (old) de jure classification of controls (on exchange rates, export earnings, capital account, current account) did not prove instructive in one of my first empirical analyzes of financial development (Chinn, 2004, unclosed version here). The Chinn-Ito index, based on the aforementioned IMF de jure classifications, was converted into a single index by taking the first principal component (essentially – the capital account component is smoothed), and was developed for a project aimed at assessing how financial openness correlates with financial development, published in JDE (2006) (with lots of help from friends including Ashok Mody, Antu Panini Murshid).
Quinn, Schindler and Toyoda (IMF Economic Review 2011) provide a first comparison of measurements. More recent comparisons are in Graebner et al. (2021) summerRten et al. (2021). Overall, the measures evolve together.
Source:Erten, Korinek, Ocampo (JEL2021).
However, on an individual country-year basis, the correlation of variations in the KAOPEN index and variations in the other indices ranges from 0.01 to 0.29 (the latter being significantly different from zero).
Ito and I are not claiming that there are no better indicators. For example, the one created by Fernandez, Klein, Rebucci, Schindler and Uribe (2016) is based on the IMF’s more detailed tabulation of de jure restrictions, both on inflows and outflows, and probably better captures the impact of controls. However, the coverage of this index is limited to 1995 and beyond, which limits the range of data that can be analyzed statistically.
The map above shows a snapshot of financial openness. What does our index say about the evolution of financial openness over the last decade (2010 to 2020)? Here is a map of the evolution of our index.
The darker the color, the greater the increase in measured financial openness.
Note that there has been substantial stability in the degree of financial openness; in the map above, most countries experience a change of 0 in ka_open (e.g. China).