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Short-run pain, long-run gain : the effects of financial liberalization

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  • Kaminsky, Graciela Laura
  • Schmukler, Sergio L.

Abstract

The authors examine the short- and long-run effects of financial liberalization on capital markets. To do so, they construct a new comprehensive chronology of financial liberalization in 28 developed and emerging economies since 1973. The authors also construct an algorithm to identify booms and busts in stock market prices. The results indicate that financial liberalization is followed by more pronounced boom-bust cycles in the short run. But financial liberalization leads to more stable markets in the long run. Finally, the authors analyze the sequencing of liberalization and institutional reforms to understand the contrasting short- and long-run effects of liberalization.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2912.

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Date of creation: 31 Oct 2002
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Handle: RePEc:wbk:wbrwps:2912

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Keywords: Insurance Law; Insurance&Risk Mitigation; Fiscal&Monetary Policy; Economic Theory&Research; Payment Systems&Infrastructure; Financial Economics; Economic Theory&Research; Insurance&Risk Mitigation; Insurance Law; Financial Intermediation;

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  1. What now, finance?
    by Ajay Shah in Ajay Shah's blog on 2008-05-18 16:15:00
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