Does Financial Liberalization Improve the Allocation of Investment? Micro Evidence from Developing Countries

Arturo José Galindo (), Fabio Schiantarelli () and Andrew Weiss ()

No 503, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Has financial liberalization improved the efficiency with which investment funds are allocated to competing uses? In this paper, we address this question, using firm level panel data from twelve developing countries. The basic idea is to investigate whether financial liberalization has increased the share of investment going to firms with a higher marginal return to capital. To this end we develop a summary index of the efficiency of allocation of investment. We then examine the relationship between this index and various measures of financial liberalization. The results suggest that in the majority of cases financial reform has lead to an increase in the efficiency with which investment funds are allocated.

Keywords: financial liberalization; investment; efficiency (search for similar items in EconPapers)
JEL-codes: E22 E44 G28 O16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-lam, nep-mfd and nep-reg
Date: 2001-06-21, Revised 2003-10-29
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Related works:
Working Paper: Does Financial Liberalization Improve the Allocation of Investment? Micro Evidence from Developing Countries (2005)
Working Paper: Does Financial Liberalization Improve the Allocation of Investment?: Micro Evidence from Developing Countries (2002)
Journal Article: Does financial liberalization improve the allocation of investment?: Micro-evidence from developing countries (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:boc:bocoec:503

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