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Financial Liberalization: A Fourth Generation Thought

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  • Sugeeth Patabendige
  • Chathuri Senarath

Abstract

Empirical studies in the late 1980s and 1990s on financial liberalization lent support to the reforms carried out in line with the Mckinnon-Shaw hypothesis. Later evidence shows financial liberalization failed to achieve its desired results in many countries. Thus, the emphasis of current literature is to identify and explain the reasons for non-achievement of expected objectives to be realized through financial liberalization. An extensive literature survey done through this study reveals two main reasons for this failure. One is the incorrect policy procedure being followed in implementing financial liberalization referred to as a sequential problem. The other is to have policy inconsistencies during the reforming periods, referred to as a macroeconomic problem. This paper analyses the theoretical evolution of financial liberalization considering the empirical evidence presented by researchers through first, second and third generations of financial liberalization. The objective is to develop a more comprehensive analysis that can be identified as a fourth generation model of financial liberalization. Future researchers can make use of this model in their empirical analysis on measuring the success of financial reforms’ in various countries

Suggested Citation

  • Sugeeth Patabendige & Chathuri Senarath, 2015. "Financial Liberalization: A Fourth Generation Thought," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 9(3), pages 73-82.
    • Handle: RePEc:ibf:gjbres:v:9:y:2015:i:3:p:73-82
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    References listed on IDEAS

    as
    1. McKinnon, Ronald I, 1989. "Financial Liberalization and Economic Development: A Reassessment of Interest-Rate Policies in Asia and Latin America," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 5(4), pages 29-54, Winter.
    2. Funke, Norbert, 1993. "Timing and sequencing of reforms: Competing views," Kiel Working Papers 552, Kiel Institute for the World Economy (IfW Kiel).
    3. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    4. Lal, Deepak, 1987. "The Political Economy of Economic Liberalization," The World Bank Economic Review, World Bank, vol. 1(2), pages 273-299, January.
    5. Norbert Funke, 1993. "Timing and Sequencing of Reforms: Competing Views and the Role of Credibility," Kyklos, Wiley Blackwell, vol. 46(3), pages 337-362, August.
    6. Sebastian Edwards & Sweder Van Wijnbergen, 1983. "The Welfare Effects of Trade and Capital Market Liberalization: Consequences of Different Sequencing Scenarios," UCLA Economics Working Papers 313, UCLA Department of Economics.
    7. Babajide Fowowe, 2008. "Financial Liberalization Policies and Economic Growth: Panel Data Evidence from Sub‐Saharan Africa," African Development Review, African Development Bank, vol. 20(3), pages 549-574.
    8. Funke, Norbert, 1993. "Timing and Sequencing of Reforms: Competing Views and the Role of Credibility," Kyklos, Wiley Blackwell, vol. 46(3), pages 337-362.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial Liberalization; Mckinnon-Shaw Hypothesis; Sequential Problem; Macroeconomic Problem; Fourth Generation Model;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises

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