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Testing financial liberalization hypothesis with ARDL modelling approach

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  • Min Shrestha
  • Khorshed Chowdhury

Abstract

It is a stylised fact that financial 'repression' retards economic growth. Hence, financial liberalization is advocated to remove the stranglehold on the economy. Financial liberalization policy argues that deregulation of interest rate would result in a higher real interest rate which would lead to increased savings, increased investment and achieve efficiency in financial resource allocation. Past studies have reported inconclusive results regarding the interest rate effects on savings and investment. This examines the financial liberalization hypothesis by employing autoregressive distributed lag (ARDL) modelling approach on Nepalese data. Results show that the real interest rate affects both savings and investment positively.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 17 (2007)
Issue (Month): 18 ()
Pages: 1529-1540

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Handle: RePEc:taf:apfiec:v:17:y:2007:i:18:p:1529-1540

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Cited by:
  1. Muhammad, Shahbaz & Lean, Hooi Hooi, 2011. "Does Financial Development Increase Energy Consumption? Role of Industrialization and Urbanization in Tunisia," MPRA Paper 33194, University Library of Munich, Germany, revised 06 Sep 2011.
  2. Qazi Hye & Wee-Yeap Lau & Marie-Aimée Tourres, 2014. "Does economic liberalization promote economic growth in Pakistan? An empirical analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(4), pages 2097-2119, July.
  3. Islam, Faridul & Shahbaz, Muhammad & Alam, Mahmudul, 2011. "Financial development and energy consumption nexus in Malaysia: A multivariate time series analysis," MPRA Paper 28403, University Library of Munich, Germany.
  4. Muhammad Tahir, 2008. "An Investigation of the Effectiveness of Financial Development in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 13(2), pages 27-44, Jul-Dec.

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