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Financial Liberalization, Banking Crises and Growth: Assessing the Links

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  • Bonfiglioli, Alessandra

    (IIES, Stockholm University.)

  • Mendicino, Caterina

    ()
    (Dept. of Economics, Stockholm School of Economics)

Abstract

This paper studies the effects of financial liberalization and banking crises on growth. It shows that financial liberalization spurs on average economic growth. Banking crises are harmful for growth, but to a lesser extent in countries with open financial systems and good institutions. The positive effect of financial liberalization is robust to different definitions. While the removal of capital account restrictions is effective by increasing financial depth, equity market liberalization affects growth directly. The empirical analysis is performed through GMM dynamic panel data estimations on a panel of 90 countries observed in the period 1975-1999.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 567.

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Length: 28 pages
Date of creation: 21 Oct 2004
Date of revision:
Handle: RePEc:hhs:hastef:0567

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Keywords: Capital account liberalization; equity market liberalization; financial development; institutions; dynamic panel data;

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Citations

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Cited by:
  1. Fecht, Falko & Grüner, Hans Peter & Hartmann, Philipp, 2012. "Financial integration, specialization and systemic risk," Working Paper Series, European Central Bank 1425, European Central Bank.
  2. Alessandra Bonfiglioli, 2007. "Financial Integration, Productivity and Capital Accumulation," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 680.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 19 Dec 2007.
  3. Davide Furceri & Stéphanie Guichard & Elena Rusticelli, 2011. "Episodes of Large Capital Inflows and the Likelihood of Banking and Currency Crises and Sudden Stops," OECD Economics Department Working Papers 865, OECD Publishing.
  4. Yunyong Thaicharoen & Sra Chuenchoksan & Ashvin Ahuja, 2007. "Big elephants in small ponds: Risk absorption, risk diversification and management of capital flows," Working Papers, Economic Research Department, Bank of Thailand 2007-02, Economic Research Department, Bank of Thailand.
  5. Kose, M. Ayhan & Prasad, Eswar & Rogoff, Kenneth & Wei, Shang-Jin, 2010. "Financial Globalization and Economic Policies," Handbook of Development Economics, Elsevier, Elsevier.
  6. Saoussen Ben Gamra & Mickaël Clévenot, 2008. "Les effets ambigus de la libéralisation financière dans les pays en développement Croissance économique ou instabilité financière ?," Post-Print, HAL hal-00323334, HAL.
  7. Bonfiglioli, Alessandra, 2005. "How Does Financial Liberalization affect Economic Growth?," Seminar Papers, Stockholm University, Institute for International Economic Studies 736, Stockholm University, Institute for International Economic Studies.

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