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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Find related papers by JEL classification: O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment G00 - Financial Economics - - General - - - General
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