Financial Liberalization: A Myth or a Miracle Cure?

Rangan Gupta and Andreas Karapatakis

No 200505, Working Papers from University of Pretoria, Department of Economics

Abstract: The paper tries to provide a comprehensive review of the literature on Financial Liberalization, spanning more than three decades, ever since 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, the paper also presents a summary of the current research in this area, covering conclusions of the endogenous growth models, issues on volatility and the relationship between financial liberalization and banking crises. The paper 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.

Pages: 35 pages
Date: 2005-10
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Journal Article: Financial Liberalization: A Myth or a Miracle Cure? (2008)
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