Stock Market Liberalizations and Export Dynamics

Melise Jaud, Madina Kukenova and Martin Strieborny

No 10307, Policy Research Working Paper Series from The World Bank

Abstract: Foreign investors facilitate efficiency-enhancing structural change in the recipient countries. After countries liberalize their stock markets and allow foreign investors to acquire equity stakes in domestic firms, products that do not correspond to the liberalizing countries' comparative advantage disappear disproportionately faster from their export portfolios. At the same time, the overall long-term export performance of the liberalizing countries improves. Domestic stock market development does not have the same disciplining effect in terminating inefficient exports. Foreign investors thus play a unique role in improving resource allocation in the real economy.

Date: 2023-02-14
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Working Paper: Stock Market Liberalizations and Export Dynamics (2021)
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