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Impact of Financial Liberalization on Welfare: Evidence from Nepal

  • Min B. SHRESTHA
  • Khorshed CHOWDHURY

This study aims at examining the impact of financial liberalization on welfare and presents the empirical evidence from Nepal using ARDL modeling cointegration test method. The test results indicate that financial liberalization is positively associated with increased employment opportunities in both rural and urban areas but negatively associated with the bank credits to the poor. From these results, it can be argued that the net impact of financial liberalization on welfare is ambiguous. Specifically, the incidence of poverty is adversely affected by financial liberalization.

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Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 7 (2007)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:7:y:2007:i:1_15
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  1. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  2. Battle, Ann Marie, 1997. "Welfare effects of liberalization reforms with distortions in financial and labor markets," Journal of Development Economics, Elsevier, vol. 52(2), pages 279-294, April.
  3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
  4. Mohsen Bahmani-Oskooee & A. B. M. Nasir, 2004. "ARDL Approach to Test the Productivity Bias Hypothesis," Review of Development Economics, Wiley Blackwell, vol. 8(3), pages 483-488, 08.
  5. Edwards, Sebastian & van Wijnbergen, Sweder, 1986. "The Welfare Effects of Trade and Capital Market Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 141-48, February.
  6. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  7. Daitoh, Ichiroh, 2003. "Financial liberalization, urban unemployment and welfare: some implications of the artificial low interest rate and the high wage rate policies in LDCs," Journal of Development Economics, Elsevier, vol. 72(1), pages 163-179, October.
  8. Wyplosz, Charles, 2001. "How Risky is Financial Liberalization in the Developing Countries?," CEPR Discussion Papers 2724, C.E.P.R. Discussion Papers.
  9. Atkins, Frank J. & Coe, Patrick J., 2002. "An ARDL bounds test of the long-run Fisher effect in the United States and Canada," Journal of Macroeconomics, Elsevier, vol. 24(2), pages 255-266, June.
  10. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  11. repec:cup:cbooks:9780521030991 is not listed on IDEAS
  12. Subrata Ghatak & Jalal Siddiki, 2001. "The use of the ARDL approach in estimating virtual exchange rates in India," Journal of Applied Statistics, Taylor & Francis Journals, vol. 28(5), pages 573-583.
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