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Emerging Markets, Financial Openness and Financial Development

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Author Info
Wei Huang ()
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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Publisher 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
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Handle: RePEc:bri:uobdis:06/588

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Related research
Keywords: emerging markets; financial openness; financial development;

Find related papers by JEL classification:
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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  29. repec:att:wimass:192054 is not listed on IDEAS
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  31. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934 Elsevier. [Downloadable!] (restricted)
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  34. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, 04. [Downloadable!] (restricted)
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  35. Kaminsky, Graciela Laura & Schmukler, Sergio L., 2002. "Short-run pain, long-run gain : the effects of financial liberalization," Policy Research Working Paper Series 2912, The World Bank. [Downloadable!]
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