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Financial Liberalisation, Stockmarkets and Economic Development

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  • Singh, Ajit

Abstract

Abstract During the 1980s and 1990s, many developing countries (DCs) have been engaged in far-reaching reforms of their financial systems, liberalising them and making them more market-oriented. This liberalisation, involving inter alia ‘financial de-repression’ has been inspired partly by the work of the McKinnon (1973) and Shaw (1973) [M-S] school. This paper suggests that, in addition to financial de-repression, there has been a major new element in the development of DC financial systems in recent years - the establishment and fast expansion of stockmarkets. These markets have played a key role in the internal as well as external financial liberalisation processes in leading DCs. Further, the paper finds that the actual behaviour of these markets in many countries has led to outcomes which undermine the effects of the higher real interest rates arising from 'financial de-repression'.
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Suggested Citation

  • Singh, Ajit, 1997. "Financial Liberalisation, Stockmarkets and Economic Development," Economic Journal, Royal Economic Society, vol. 107(442), pages 771-782, May.
    • Handle: RePEc:ecj:econjl:v:107:y:1997:i:442:p:771-82
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    References listed on IDEAS

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    1. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    3. Corbett, Jennifer & Jenkinson, Tim, 1994. "The Financing of Industry, 1970-89: An International Comparison," CEPR Discussion Papers 948, C.E.P.R. Discussion Papers.
    4. Cho, Yoon Je, 1986. "Inefficiencies from Financial Liberalization in the Absence of Well-Functioning Equity Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(2), pages 191-199, May.
    5. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
    6. John Mullin, 1993. "Emerging equity markets in the global economy," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 54-83.
    7. Kenji Kojima, 1994. "An International Perspective on Japanese Corporate Finance," Kobe Economic & Business Review, Research Institute for Economics & Business Administration, Kobe University, vol. 39, pages 11-59.
    8. Amsden, Alice H. & Euh, Yoon-Dae, 1993. "South Korea's 1980s financial reforms: Good-bye financial repression (maybe), hello new institutional restraints," World Development, Elsevier, vol. 21(3), pages 379-390, March.
    9. Allen, Franklin & Gale, Douglas, 1995. "A welfare comparison of intermediaries and financial markets in Germany and the US," European Economic Review, Elsevier, vol. 39(2), pages 179-209, February.
    10. Cho, Yoon Je, 1989. "Finance and Development: The Korean Approach," Oxford Review of Economic Policy, Oxford University Press, vol. 5(4), pages 88-102, Winter.
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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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