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Emerging Markets, Financial Openness and Financial Development

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  • Wei Huang

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    Abstract

    We examine the effect of financial openness on the development of financial systems in a panel of 35 emerging markets during the period of 1976 to 2003. A group of indicators including variables from banking sector, stock market, and national capital accounts are used as measures of financial openness and financial development. In addition, aggregate index measures are developed to incorporate information from different areas of the financial system. Our empirical results generally suggest that financial openness is the key determinant of cross-country differences in the development of financial systems. When testing financial openness against the development of the banking sector and stock market separately, we found strong and robust evidence that this link between openness and development exists in stock markets. Although a similar link is sometimes found with banking sectors, it is not robust to different indicators of financial openness and model specifications.

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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 06/588.

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    Length: 43 pages
    Date of creation: Jul 2006
    Date of revision:
    Handle: RePEc:bri:uobdis:06/588

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    Keywords: emerging markets; financial openness; financial development;

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    Cited by:
    1. Ba, Lika & Gasmi, Farid, 2011. "To what extent do infrastructure and financial sectors reforms interplay? Evidence from panel data on the power sector in developing countries," TSE Working Papers, Toulouse School of Economics (TSE) 11-264, Toulouse School of Economics (TSE).
    2. Ba, Lika & Gasmi, Farid, 2011. "To what extent do infrastructure and financial sectors reforms interplay? Evidence from panel data on the power sector in developing countries," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 692, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Edgar Demetrio Tovar García., 2012. "Financial Globalization and Financial Development in Transition Countries," Economía: teoría y práctica, Economía: teoría y práctica, Economía: teoría y práctica, vol. 36(1), pages 155-178, Enero-Jun.

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