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Financial Development, Openness and Institutions: Evidence from Panel Data

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  • Badi H. Baltagi

    (Syracuse University and University of Leicester)

  • Panicos O. Demetriades

    (University of Leicester)

  • Siong Hook Law

    (University Putra Malaysia)

Abstract

Utilising four annual panel datasets and dynamic panel data estimation procedures we find that trade and financial openness, as well as economic institutions are statistically important determinants of the variation in financial development across countries and over time since the 1980s. However, we find mixed support for the hypothesis that the simultaneous opening of both trade and capital accounts is necessary to promote financial development in a contemporary setting.

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Bibliographic Info

Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0022.

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Date of creation: May 2007
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Handle: RePEc:wef:wpaper:0022

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Keywords: Financial development; Trade Openness; Financial Openness; Economic Institutions; Financial Liberalization; Dynamic Panel Data Analysis;

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  1. Michael Klein & Giovanni Olivei, 1999. "Capital account liberalization, financial depth, and economic growth," Working Papers 99-6, Federal Reserve Bank of Boston.
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Cited by:
  1. Tamazian, Artur & Bhaskara Rao, B., 2010. "Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies," Energy Economics, Elsevier, vol. 32(1), pages 137-145, January.
  2. Michael Enowbi-Batuo & Mlambo Kupukile, 2010. "How can economic and political liberalisation improve financial development in African countries?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 2(1), pages 35-59, May.
  3. Thierry Tressel & Enrica Detragiache, 2008. "Do Financial Sector Reforms Lead to Financial Development? Evidence From a New Dataset," IMF Working Papers 08/265, International Monetary Fund.
  4. Abdelkarim Yahyaoui & Atef Rahmani, 2009. "Financial Development and Economic Growth: Role of Institutional Quality," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 327-357, September.
  5. Badi H. Baltagi & Panicos O. Demetriades & Siong Hook Law, 2008. "Financial Development and Openness: Evidence from Panel Data," Center for Policy Research Working Papers 107, Center for Policy Research, Maxwell School, Syracuse University.
  6. Vivien Kappel, 2010. "The Effects of Financial Development on Income Inequality and Poverty," CER-ETH Economics working paper series 10/127, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  7. Jerzy Pruski & Piotr Szpunar, 2008. "Capital flows and their implications for monetary and financial stability: the experience of Poland," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 403-421 Bank for International Settlements.
  8. Bank for International Settlements, 2008. "Financial globalisation and emerging market capital flows," BIS Papers, Bank for International Settlements, number 44, 8.
  9. Xu, T.T., 2012. "The role of credit in international business cycles," Cambridge Working Papers in Economics 1202, Faculty of Economics, University of Cambridge.
  10. Law, Siong Hook & Azman-Saini, W.N.W., 2008. "The Quality of Institutions and Financial Development," MPRA Paper 12107, University Library of Munich, Germany.
  11. Marc Quintyn & Geneviève Verdier, 2010. "Mother, Can I Trust the Government? Sustained Financial Deepening," IMF Working Papers 10/210, International Monetary Fund.

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