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Does Financial Liberalization Spur Growth (2005)
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| Venue: | Journal of Financial Economics |
| Citations: | 387 - 8 self |
BibTeX
@ARTICLE{Bekaert05doesfinancial,
author = {Geert Bekaert and Campbell R. Harvey and Christian Lundblad and Han Kim and Luc Laeven and Michael Pagano and Vicente Pons and Tano Santos and Andrei Shleifer and René Stulz},
title = {Does Financial Liberalization Spur Growth},
journal = {Journal of Financial Economics},
year = {2005},
pages = {3--55}
}
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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 a business cycle effect. The channel of growth is both increased investment post liberalization which partially reflects a decreased cost of capital and increased factor productivity. The additional investment is largely financed by foreign capital leading to deteriorating trade balances. Some of the liberalization effect can be accounted for by coincidental macroeconomic reforms as well as financial development. However, our analysis shows that even after controlling for a broad range of variables, a statistically significant and economically important role is played by equity market liberalization. We appreciate the helpful comments of Wayne Ferson, Peter Henry, Ross Levine, Graciela Kaminsky,
Keyphrases
financial liberalization spur growth equity market liberalization important role broad range additional investment decreased cost financial development foreign capital graciela kaminsky peter henry helpful comment business cycle effect coincidental macroeconomic reform liberalization effect ross levine five-year period trade balance percent increase wayne ferson increased investment post liberalization alternative definition annual real economic growth factor productivity
