Financial Liberalization and Macroeconomic Performance: Empirical Evidence from Selected Asian Countries

Muhammad Raza () and Hassan Muhsin

International Journal of Financial Economics, 2013, vol. 1, issue 1, 16-27

Abstract: Financially repressed economy cannot grow with an increasing growth rate. That‟s why most of the developing countries move toward liberalized financial system. The basic objective of this paper is to provide a comparative analysis of Pakistan, China, and India financial sector liberalization and its impact on macroeconomic performance. This study uses descriptive statistics and Johansen co integration to provide cross country evidence of long run relationship between macroeconomic variables and financial openness. Shocks in short run are captured through VECM and the causal relation is investigated through Granger causality. Analysis shows that there exist long run relationship between financial liberalization and macroeconomic performance. Granger causilty provide evidence for direction of causality in all the three countries. Data is not available on quarterly basis. More variable must be included to measure financial development i.e. liquidity, non performing loans. Policy makers must introduce more financial reforms. Pakistan and china must focus on banking sector. Area of international trade and foreign direct investment must be strengthen.

Keywords: Financial liberalization; financial depth. Economic growth (search for similar items in EconPapers)
Date: 2013
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Related works:
Working Paper: Financial liberalization and macroeconomic performance, empirical evidence from selected Asian countries (2011)
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