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

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

No 625, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Using firm level panel data from twelve developing countries we explore if financial liberalization improves the efficiency with which investment funds are allocated. A summary index of the efficiency of investment allocation that measures whether investment funds are going to firms with a higher marginal return to capital is developed. We examine the relationship between this and various measures of financial liberalization and find that liberalization increases the efficiency with which investment funds are allocated. This holds after various robustness checks and is consistent with firm level evidence that a stronger association between investment and fundamentals after financial liberalization.

Keywords: financial liberalization; investment; efficiency; reform; development (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-cwa, nep-dev, nep-fin, nep-fmk, nep-int, nep-lam, nep-mac and nep-reg
Date: 2005-10-04
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Forthcoming, Journal of Development Economics

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Related works:
Working Paper: Does Financial Liberalization Improve the Allocation of Investment? Micro Evidence from Developing Countries (2003)
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:625

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