 Estimating the Effects of Financial Liberalisation on Governability and Social StabilityForeign Trade Review, 2024, vol. 59, issue 4, 588-614 Abstract: This article studies the effects of financial liberalisation on governability. The dependent variables measure governability in terms of control of corruption, government effectiveness, political stability, rule of law, regulatory quality and free speech for 125 countries from 1996 to 2019. As a variable measuring financial liberalisation, I use the Chinn-Ito index and Fernandez index as capital control measure. I use fixed-effects panel data, quantile regression, system GMM and event study to estimate these effects. The results I find show that the financial liberalisation has strong effects on those governability variables, especially low-income countries tend to have a higher sensitivity to changes in capital controls on governability and social stability, as well as countries in the 0.4–0.6 quantiles of the governability. Finally, I find that these effects take at least one year to become persistent over time. These findings imply that, in times of political turbulence and instability, governments may pursue liberalising policies that increase the dynamism of the economy to alleviate the climate of ungovernability. JEL Codes: F38, D72, P16 Keywords: Financial liberalisation; capital controls; governability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:fortra:v:59:y:2024:i:4:p:588-614 DOI: 10.1177/00157325231173209 Access Statistics for this article More articles in Foreign Trade Review |
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