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Will political liberalisation bring about financial development?

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  • Yongfu Huang

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Abstract

This paper studies the e¤ect of political liberalisation on financial development in two steps. First, the paper examines whether political liberalisation in terms of institutional improvement promotes financial development, using a panel dataset of 90 developed and developing countries over 1960-99. The empirical evidence reveals a positive effect on financial development at least in the short-run, particularly for lower-income countries, ethnically divided countries and French legal origin countries. In the second part of the paper, a before-after event study approach is used to explore the impact of democratic transitions on financial development. It indicates that a democratic transformation is typically followed by an increase in financial development.

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Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 05/578.

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Length: 35 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:bri:uobdis:05/578

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Keywords: Political liberalisation; Financial development.;

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Citations

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Cited by:
  1. Hovhannes Toroyan & George C. Anayiotos, 2009. "Institutional Factors and Financial Sector Development," IMF Working Papers, International Monetary Fund 09/258, International Monetary Fund.
  2. Edgar Demetrio Tovar, 2011. "Globalización financiera y sus efectos sobre el desarrollo financiero," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, BANCO DE LA REPÚBLICA - ESPE.
  3. Yongfu Huang, 2011. "Private investment and financial development in a globalized world," Empirical Economics, Springer, Springer, vol. 41(1), pages 43-56, August.
  4. Yongfu Huang, 2006. "On the political economy of financial reform," Bristol Economics Discussion Papers, Department of Economics, University of Bristol, UK 06/586, Department of Economics, University of Bristol, UK.
  5. Jalil, Abdul & Feridun, Mete & Ma, Ying, 2010. "Finance-growth nexus in China revisited: New evidence from principal components and ARDL bounds tests," International Review of Economics & Finance, Elsevier, Elsevier, vol. 19(2), pages 189-195, April.
  6. Law, Siong Hook & Azman-Saini, W.N.W., 2008. "The Quality of Institutions and Financial Development," MPRA Paper 12107, University Library of Munich, Germany.
  7. Yongfu Huang, 2005. "What determines financial development?," Bristol Economics Discussion Papers, Department of Economics, University of Bristol, UK 05/580, Department of Economics, University of Bristol, UK.
  8. Yallwe, Hagos Alem & Buscemi, Antonino, 2011. "Money laundry and financial development," MPRA Paper 32219, University Library of Munich, Germany.
  9. Pornpinun Chantapacdepong, 2007. "Determinants of the time varying risk premia," Bristol Economics Discussion Papers, Department of Economics, University of Bristol, UK 07/597, Department of Economics, University of Bristol, UK.
  10. Jalil, Abdul & Feridun, Mete, 2011. "The impact of growth, energy and financial development on the environment in China: A cointegration analysis," Energy Economics, Elsevier, Elsevier, vol. 33(2), pages 284-291, March.

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