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Financial Liberalization: The Experience of Developing Countries

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  • Philip Arestis

    ()
    (Department of Economics, University of East London)

  • Panicos Demetriades

    ()
    (The Business School, South Bank University, London)

Abstract

This paper investigates the experience of developing countries with financial liberalization, focusing on the gap between theory and evidence. While the former suggests positive effects on economic development, the latter pinpoints to significant destabilizing consequences. e argue that the main implicit assumptions of the financial liberalization thesis, perfect information and perfect competition, along with the scant attention paid to stock markets, are responsible for this discrepancy. We conclude by suggesting that a great deal more caution should be disposed in the future when implementing financial liberalization policies.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume25/V25N4P441_457.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 25 (1999)
Issue (Month): 4 (Fall)
Pages: 441-457

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Handle: RePEc:eej:eeconj:v:25:y:1999:i:4:p:441-457

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Keywords: Developing Countries; Development; Financial Liberalization;

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Cited by:
  1. Ang, James B. & McKibbin, Warwick J., 2007. "Financial liberalization, financial sector development and growth: Evidence from Malaysia," Journal of Development Economics, Elsevier, Elsevier, vol. 84(1), pages 215-233, September.
  2. Dandume, Muhammad Yusuf & A.C., Dr.Malarvizhi, 2014. "Does Financial Liberalization, Spur Economic Growth and Poverty Reduction in Six Sub-Saharan African Countries; Panel Unit Root and Panel Vector Error Correction Tests," MPRA Paper 52349, University Library of Munich, Germany, revised Aug 2013.
  3. Qazi Muhammad Adnan Hye & Shahida Wizarat, 2011. "Impact of financial liberalization on agricultural growth: a case study of Pakistan," China Agricultural Economic Review, Emerald Group Publishing, Emerald Group Publishing, vol. 3(2), pages 191-209, May.
  4. Brian Burgoon & Panicos O. Demetriades & Geoffrey R.D. Underhill, 2011. "Sources and Legitimacy of Financial Liberalization," Discussion Papers in Economics, Department of Economics, University of Leicester 11/45, Department of Economics, University of Leicester.
  5. Groenewold, Nicolaas & Tang, Sam Hak Kan & Wu, Yanrui, 2003. "The efficiency of the Chinese stock market and the role of the banks," Journal of Asian Economics, Elsevier, Elsevier, vol. 14(4), pages 593-609, August.
  6. Brian Burgoon & Panicos Demetriades & Geoffrey R D Underhill, 2008. "Financial Liberalisation and Political Variables: a response to Abiad and Mody," WEF Working Papers, ESRC World Economy and Finance Research Programme, Birkbeck, University of London 0039, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  7. Panicos O Demetriades & Kul B Luintel, 2000. "Financial Restraints in the South Korean Miracle," Discussion Papers in Economics, Department of Economics, University of Leicester 00/5, Department of Economics, University of Leicester.
  8. repec:hal:wpaper:hal-00188615 is not listed on IDEAS
  9. Thomas Barnebeck Andersen & Finn Tarp, 2003. "Financial liberalization, financial development and economic growth in LDCs," Journal of International Development, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 15(2), pages 189-209.
  10. Colin Kirkpatrick, 2005. "Finance and Development: Overview and Introduction," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(4), pages 631-635.
  11. Gregory James & Michail Karoglou, 2009. "Financial Liberalisation and Stock Market Volatility: The Case of Indonesia," Discussion Paper Series, Department of Economics, Loughborough University 2009_11, Department of Economics, Loughborough University, revised Sep 2009.
  12. Christian E. Weller & Manita Rao, 2008. "Can Progressive Taxation Contribute to Economic Development?," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp176, Political Economy Research Institute, University of Massachusetts at Amherst.
  13. Robert Prasch, 2001. "The Economic Contributions of Robert A. Mundell," Review of Political Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(1), pages 41-58.
  14. Michail Karoglou & Panicos Demetriades & Siong Law, 2011. "One date, one break?," Empirical Economics, Springer, Springer, vol. 41(1), pages 7-24, August.
  15. Tarron Khemraj, 2008. "Excess liquidity, oligopolistic loan markets and monetary policy in LDCs," Working Papers, United Nations, Department of Economics and Social Affairs 64, United Nations, Department of Economics and Social Affairs.
  16. Gehringer, Agnieszka, 2013. "Financial liberalization, financial development and productivity growth: An overview," Economics Discussion Papers 2013-46, Kiel Institute for the World Economy.
  17. Saoussen Ben Gamra & Mickaël Clévenot, 2006. "Libéralisation financière et crises bancaires dans les pays émergents," CEPN Working Papers, HAL hal-00188615, HAL.
  18. Tarron Khemraj, 2007. "What does excess bank liquidity say about the loan market in Less Developed Countries?," Working Papers, United Nations, Department of Economics and Social Affairs 60, United Nations, Department of Economics and Social Affairs.
  19. Christian Weller & Laura Singleton, 2004. "Political Freedom, External Liberalization and Financial Stability," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(1), pages 1-22.

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