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External financial liberalization and growth in emerging countries: a panel data estimation using a new index (1990-2004)

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  • Cesar Rodrigues van der Laan
  • André Moreira Cunha
  • Tiago Wickstrom Alves
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    Abstract

    The 2008 financial crisis and its economic downturn have reignited the fierce debate about the financial liberalization and its implications on economic growth, especially in the realm of the developing countries. In this paper, we focus on this line of research, contributing in two main ways. First, we present an alternative method to measure financial liberalization, based on the same International Monetary Fund (IMF) annual reports most studies currently use as source of data. Second, we use panel data for a group of relevant emerging countries in Latin America and East Asia, including the new proxy in an attempt to test its effects on economic growth during the recent period (1990-2004). The more reliable index has not changed the main consensus on the subject, though, as results are in accordance with the prevalent thesis on the literature, that is, the link between financial liberalization and economic growth might not be as strong as may be supposed in theory. This means the other basic theoretical determinants must instead be observed to spur growth, while countries should observe the Keynesian agenda of stabilizing international finance through the introduction of limits to the free mobility of capital flows, as IMF economists have recently supported.

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    Bibliographic Info

    Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

    Volume (Year): 33 (2010)
    Issue (Month): 2 (January)
    Pages: 307-332

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    Handle: RePEc:mes:postke:v:33:y:2010:i:2:p:307-332

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    Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

    Related research

    Keywords: economic growth; financial liberalization; panel data;

    References

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    1. Manoel Carlos de Castro Pires, 2004. "O Efeito da Liberalização da Conta de Capital sobre a Política Fiscal : Evidências para o Caso Brasileiro Recente (1995-2000)," Discussion Papers 1061, Instituto de Pesquisa Econômica Aplicada - IPEA.
    2. Márcio Gomes Pinto Garcia & Bernando S. de M. Carvalho, 2006. "Ineffective controls on capital inflows under sophisticated financial markets: Brazil in the nineties," Textos para discussão 516, Department of Economics PUC-Rio (Brazil).
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    12. Akira Ariyoshi & Andrei Kirilenko & Inci Ötker & Bernard Laurens & Jorge Iván Canales Kriljenko & Karl Friedrich Habermeier, 2000. "Capital Controls: Country Experiences with Their Use and Liberalization," IMF Occasional Papers 190, International Monetary Fund.
    13. Fernando Ferrari-Filho & Frederico G. Jayme Jr & Gilberto Tadeu Lima & José Luís Oreiro & Luiz Fernando de Paula, 2004. "Uma avaliação crítica da proposta de conversibilidade plena do real," Textos para Discussão Cedeplar-UFMG td235, Cedeplar, Universidade Federal de Minas Gerais.
    14. Barry Eichengreen & David Leblang, 2003. "Capital Account Liberalization and Growth: Was Mr. Mahathir Right?," NBER Working Papers 9427, National Bureau of Economic Research, Inc.
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