IDEAS home Printed from https://ideas.repec.org/a/eee/jimfin/v33y2013icp255-281.html
   My bibliography  Save this article

Financial liberalization and economic growth: A meta-analysis

Author

Listed:
  • Bumann, Silke
  • Hermes, Niels
  • Lensink, Robert

Abstract

This study provides a systematic analysis of the empirical literature on the relationship between financial liberalization and economic growth by conducting a meta-analysis, based on 441 t-statistics reported in 60 empirical studies. We focus on explaining the heterogeneity of results in our sample in terms of study-, data- and method-specific characteristics. Although our findings indicate that, on average, there is a positive effect of financial liberalization on growth, the significance of this effect is only weak. Moreover, we find that most of the variables that may help explain the heterogeneity of results are insignificant. There are two exceptions. First, studies carried out based on data from the 1970s on average find a statistically less significant relationship between financial liberalization policies and growth (i.e. they report lower t-statistics) as compared to studies using data from the 1980s. Second, studies controlling for the level of development of the financial system report lower t-statistics for the relationship between liberalization and growth.

Suggested Citation

  • Bumann, Silke & Hermes, Niels & Lensink, Robert, 2013. "Financial liberalization and economic growth: A meta-analysis," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 255-281.
  • Handle: RePEc:eee:jimfin:v:33:y:2013:i:c:p:255-281
    DOI: 10.1016/j.jimonfin.2012.11.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0261560612002033
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, April.
    2. Aaron Tornell & Frank Westermann & Lorenza Martinez, 2004. "The Positive Link Between Financial Liberalization Growth and Crises," UCLA Economics Working Papers 834, UCLA Department of Economics.
    3. Nijkamp, Peter & Poot, Jacques, 2004. "Meta-analysis of the effect of fiscal policies on long-run growth," European Journal of Political Economy, Elsevier, vol. 20(1), pages 91-124, March.
    4. Ayhan Kose & Kenneth Rogoff & Eswar S Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries; Some Empirical Evidence," IMF Occasional Papers 220, International Monetary Fund.
    5. Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, vol. 28(6), pages 1075-1086, June.
    6. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries," Journal of International Economics, Elsevier, vol. 55(2), pages 263-294, December.
    7. Kose, M. Ayhan & Prasad, Eswar & Rogoff, Kenneth & Wei, Shang-Jin, 2010. "Financial Globalization and Economic Policies," Handbook of Development Economics, Elsevier.
    8. Peter Blair Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 887-935, December.
    9. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2005. "Does financial liberalization spur growth?," Journal of Financial Economics, Elsevier, vol. 77(1), pages 3-55, July.
    10. Florax, Raymond J.G.M., 2001. "Methodological pitfalls in meta-analysis: publication bias," Serie Research Memoranda 0028, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    11. Mark J. Koetse & Henri L.F. de Groot & Raymond J.G.M. Florax, 2009. "A Meta-Analysis of the Investment-Uncertainty Relationship," Southern Economic Journal, Southern Economic Association, vol. 76(1), pages 283-306, July.
    12. Mookerjee, Rajen, 2006. "A meta-analysis of the export growth hypothesis," Economics Letters, Elsevier, vol. 91(3), pages 395-401, June.
    13. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers 07-004, Stanford Institute for Economic Policy Research.
    14. Demirguc-Kent, Asli & Detragiache, Enrica, 1998. "Financial liberalization and financial fragility," Policy Research Working Paper Series 1917, The World Bank.
    15. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    16. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
    17. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
    18. Hristos Doucouliagos & Martin Paldam, 2009. "The Aid Effectiveness Literature: The Sad Results Of 40 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 433-461, July.
    19. Doucouliagos, Chris & Ulubasoglu, Mehmet Ali, 2006. "Economic freedom and economic growth: Does specification make a difference?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 60-81, March.
    20. Francis Pang & Mike Drummond & Fujian Song, 1999. "The use of meta-analysis in economic evaluation," Working Papers 173chedp, Centre for Health Economics, University of York.
    21. Jeroen Klomp & Jakob de Haan, 2010. "Inflation And Central Bank Independence: A Meta-Regression Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 593-621, September.
    22. Hali J. Edison & Michael W. Klein & Luca Antonio Ricci & Torsten Sløk, 2004. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 1-2.
    23. Chris Doucouliagos, 2005. "Publication Bias in the Economic Freedom and Economic Growth Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 367-387, July.
    24. Kose, M. Ayhan & Prasad, Eswar & Rogoff, Kenneth & Wei, Shang-Jin, 2010. "Postscript to Financial Globalization and Economic Policies," Handbook of Development Economics, Elsevier.
    25. Thomas Barnebeck Andersen & Finn Tarp, 2003. "Financial liberalization, financial development and economic growth in LDCs," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(2), pages 189-209.
    26. Abdul Abiad & Enrica Detragiache & Thierry Tressel, 2010. "A New Database of Financial Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 281-302, June.
    27. Niels Hermes & Robert Lensink, 2008. "Does financial liberalization influence saving, investment and economic growth: evidence from 25 emerging market economies, 1973-1996," ULB Institutional Repository 2013/14403, ULB -- Universite Libre de Bruxelles.
    28. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
    29. 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.
    30. Hristos Doucouliagos & T. D. Stanley, 2009. "Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis," British Journal of Industrial Relations, London School of Economics, vol. 47(2), pages 406-428, June.
    31. Laura de Dominicis & Raymond J. G. M. Florax & Henri L. F. de Groot, 2008. "A Meta-Analysis On The Relationship Between Income Inequality And Economic Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(5), pages 654-682, November.
    32. Geert Bekaert & Campbell Harvey & Christian T. Lundblad, 2003. "Equity market liberalization in emerging markets," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 53-74.
    33. T. D. Stanley, 2001. "Wheat from Chaff: Meta-analysis as Quantitative Literature Review," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 131-150, Summer.
    34. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
    35. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:33:y:2013:i:c:p:255-281. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/30443 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.