Financial Liberalization: A Myth or a Miracle Cure?

Rangan Gupta and Andreas G Karapatakis

The IUP Journal of Monetary Economics, 2008, vol. VI, issue 1, 6-33

Abstract: This paper provides a comprehensive review of the literature on ‘Financial Liberalization’, spanning more than three decades, starting from the independent contributions of McKinnon and Shaw in 1973 on this topic. In this regard, the paper revisits and evaluates the propositions of the Liberal School, and its most prominent critique, the Neostructuralist School, in terms of theoretical and empirical evidences available. Moreover, it also presents a summary of the current research in this area, covering the conclusions of the endogenous growth models, issues on volatility and the relationship between financial liberalization and banking crises. It concludes by suggesting that the only viable way forward for any country that wants to participate fully in the benefits of economic growth would, of course, not be to restore repression, but to adopt a more ‘measured and nuanced’ approach to financial liberalization.

Date: 2008
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Working Paper: Financial Liberalization: A Myth or a Miracle Cure? (2005)
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