Does Growth Cause Financial Deregulation in China? An Instrumental Variables Approach

Qichun He

MPRA Paper from University Library of Munich, Germany

Abstract: Following Miguel et al. (2004), we use temperature and hours of sunshine variations as instrumental variables for economic growth in 27 Chinese provinces during 1981--98. Our 2SLS (Two-stage least squares) regression finds that growth has no significant effect on financial deregulation after controlling for predetermined home-bias political variable, population size, and time and province effects. Moreover, the home-bias political variable has a significant effect on financial deregulation, which shows that political and cultural factors are important driving forces in determining the path and logic of Chinese financial deregulation. The results hold up when we use GMM (Generalized method of moments) to deal with heteroskedasticity. The results are also robust in LIML (Limited information maximum likelihood) estimation that deals with weak instruments.

Keywords: Financial Deregulation; Growth; Causality (search for similar items in EconPapers)
JEL-codes: C23 O43 (search for similar items in EconPapers)
Date: 2011-10-01
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34449

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