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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.

Suggested Citation

  • 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.
    • Handle: RePEc:wbk:wbrwps:2912
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    More about this item

    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;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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