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Does Financial Liberalization Spur Growth?

Geert Bekaert, Campbell Harvey (cam.harvey@duke.edu) and Christian Lundblad
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Christian Lundblad: Indiana University, Bloomington,USA

No 53, Working Paper Research from National Bank of Belgium

Abstract: We show that equity market liberalizations, on average, lead to a one percent increase in annual real economic growth over a five-year period. The effect is robust to alternative definitions of liberalization and does not reflect variation in the world business cycle. The effect also remains intact when liberalization is instrumented with quality of institutions-variables that explain liberalization but not growth and when a growth opportunity measure is included in the regression. Capital account liberalization has a less robust effect on growth than equity market liberalization has. Other simultaneous reforms only partially account for the effect. Finally, we examine why some countries respond to equity market liberalization differently from others.

Pages: 56 pages
Date: 2004-05
New Economics Papers: this item is included in nep-fin and nep-ifn
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Citations: View citations in EconPapers (36)

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https://www.nbb.be/doc/ts/publications/wp/wp53en.pdf (application/pdf)

Related works:
Journal Article: Does financial liberalization spur growth? (2005) Downloads
Working Paper: Does Financial Liberalization Spur Growth? (2001) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:200405-9

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