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Home-bias Politics, Financial Deregulation and Economic Growth: A Causal Relationship

Qichun He

MPRA Paper from University Library of Munich, Germany

Abstract: We re-examine the finance-growth nexus using the Chinese financial deregulation experience during the reform period 1981-1998. We use lagged home-bias political variables as instruments for financial deregulation. Dealing with weak instruments by LIML (limited-information maximum likelihood) estimation, we find that financial deregulation has a significant causal effect on economic growth. The result holds up when we control for conditional convergence, other growth determinants, and time and province effects.

Keywords: Financial Deregulation; Home-bias Politics; Causality; Growth (search for similar items in EconPapers)
JEL-codes: G20 O21 (search for similar items in EconPapers)
Date: 2011-10-15
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-reg
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