Liberalization, Growth, and Financial Crises: Lessons from Mexico and the Developing World
AbstractAlthough the case for trade liberalization is now well established, the case for financial liberalization is not, because the latter is associated with lending booms and crises. Some critics invoke as evidence the recent weak growth of Mexico, a prominent liberalizer. We argue that liberalization is beneficial despite the occurrence of crises. First, we show that financial liberalization has typically followed trade liberalization, and that both have led to faster growth, despite more frequent booms and busts. Second, we present a model that shows why, in countries with severe credit market imperfections, liberalization leads to faster growth and, as a by-product, to financial fragility. Third, comparing Mexico with this international norm, we show that liberalization and NAFTA have induced faster growth and investment but have not been enough: lack of structural reform and a protracted credit crunch generated bottlenecks that blocked further growth and led to a slowdown in exports.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.
Volume (Year): 34 (2003)
Issue (Month): 2 ()
Contact details of provider:
Postal: 1775 Massachusetts Ave NW, Washington DC 20036
Phone: (202) 797-6000
Fax: (202) 797-6004
Web page: http://www.brookings.edu/economics.aspx
More information through EDIRC
Mexico; bank; growth; financial crisis; macroeconomics;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Prof. Frank Westermann Ph.D., 2012. "Linkages between Sectoral Output Growth and Financial Development in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 24(2), pages 15-30, October.
- Timothy J. Kehoe & Felipe Meza, 2011.
"Catch-up growth followed by stagnation: Mexico, 1950–2010,"
693, Federal Reserve Bank of Minneapolis.
- Timothy J. Kehoe & Felipe Meza, 2011. "Catch-up Growth Followed by Stagnation: Mexico, 1950–2010," NBER Working Papers 17700, National Bureau of Economic Research, Inc.
- Nitin Gupta, 2011. "The Differential Effects of Financial Development on India's Industrial Performance," ASARC Working Papers 2011-12, The Australian National University, Australia South Asia Research Centre.
- Katharina Diekmann & Frank Westermann, 2010.
"Financial Development and Sectoral Output Growth in 19th Century Germany,"
CESifo Working Paper Series
3283, CESifo Group Munich.
- Katharina Diekmann & Frank Westermann, 2010. "Financial Development and Sectoral Output Growth in 19th Century Germany," Working Papers 86, Institute of Empirical Economic Research.
- Westermann, Frank & Diekmann, Katharina, 2011. "Financial Development and Sectoral Output: Growth in 19th Century Germany," Proceedings of the German Development Economics Conference, Berlin 2011 81, Verein für Socialpolitik, Research Committee Development Economics.
- Raoul Minetti & Matteo Iacoviello, 2010. "Foreign Lenders in Emerging Economies," 2010 Meeting Papers 1050, Society for Economic Dynamics.
- Timothy J. Kehoe & Kim J. Ruhl, 2010.
"Why Have Economic Reforms in Mexico Not Generated Growth?,"
NBER Working Papers
16580, National Bureau of Economic Research, Inc.
- Timothy J. Kehoe & Kim J. Ruhl, 2010. "Why Have Economic Reforms in Mexico Not Generated Growth?," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 1005-27, December.
- Timothy J. Kehoe & Kim J. Ruhl, 2010. "Why have economic reforms in Mexico not generated growth?," Staff Report 453, Federal Reserve Bank of Minneapolis.
- Aaron Tornell & Frank Westermann & Lorenza Martinez, 2004.
"NAFTA and Mexico's Less-Than-Stellar Performance,"
NBER Working Papers
10289, National Bureau of Economic Research, Inc.
- Vessela Todorova, 2011. "Theoretical Link between the Economic and Financial Crises in Evolution," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 55-74.
- M. Ayhan Kose & Christopher M. Towe & Guy Meredith, 2004. "How Has Nafta Affected the Mexican Economy? Review and Evidence," IMF Working Papers 04/59, International Monetary Fund.
- Nannette Lindenberg & Frank Westermann, 2009.
"How Strong is the Case for Dollarization in Costa Rica? A Note on the Business Cycle Comovements with the United States,"
CESifo Working Paper Series
2785, CESifo Group Munich.
- Nannette Lindenberg & Frank Westermann, 2009. "How Strong is the Case for Dollarization in Costa Rica? A Note on the Business Cycle Comovements with the United States," Working Papers 79, Institute of Empirical Economic Research.
- Dieter Gerdesmeier & Hans‐Eggert Reimers & Barbara Roffia, 2010.
"Asset Price Misalignments and the Role of Money and Credit,"
Wiley Blackwell, vol. 13(3), pages 377-407, Winter.
- Gerdesmeier, Dieter & Roffia, Barbara & Reimers, Hans-Eggert, 2009. "Asset price misalignments and the role of money and credit," Working Paper Series 1068, European Central Bank.
- Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2004. "Acceding Countries: The Road to the Euro," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 119-136, October.
- Pamela Góngora Salazar, 2010. "Determinantes de la volatilidad en el producto: evidencia empírica," VNIVERSITAS ECONÃMICA 008297, UNIVERSIDAD JAVERIANA - BOGOTÁ.
- Falko Fecht & Hans Peter Grüner & Manfred Jäger & Frank Westermann, 2009. "Bad Banks: Überzeugt das Konzept der Bundesregierung?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 62(13), pages 03-13, 07.
- ince, meltem, 2011. "Financial liberalization, financial development and economic growth: An empirical analysis for Turkey," MPRA Paper 31978, University Library of Munich, Germany, revised 05 May 2011.
- repec:nrb:journl:v:24:y:2012:i:2:p:2 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eric Encarnacion).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.