Capital Account Openess and Unemployment (Preliminary and Incomplete ) * Qingyuan Du † Jun Nie ‡ Shang-Jin Wei § May 3, 2015 Abstract We investigate how capital account openness affect a country’s unemployment in this paper. In theory, using a standard labor search and match model, we find that, in the steady state, a rise in capital account openness will lead to a lower unemployment when the labor market is flexible. However, a rise in capital account openness can yield a higher unemployment when labor market becomes sufficiently rigid. We also provide suggestive empirical evidence to support our theoretical predictions. * The views expressed in this paper are those of the authors and do not necessarily reflect the views and policies of Monash University, the Federal Reserve Bank of Kansas City, and the AsianDevelopment Bank or its Board of Governors or the governments they represents. † Department of Economics, Monash University, qingyuan.du@monash.edu ‡ Research Department, Federal Reserve Bank of Kansas City, Jun.Nie@kc.frb.org § Asian Development Bank, swei@adb.org 1