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On The Growth Effects Of Equity Market Liberalization

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  • ZHEN LI

    (Albion College)

Abstract

While equity market liberalization has been found to be associated with faster economic growth, such a correlation alone cannot identify the direction of causation. Using instrumental variables (IV) methodology, this paper presents empirical evidence of strong growth effects of equity market liberalization. Systematic differences exist in the growth effects across countries at different income levels, and with different size of equity markets. Equity market liberalization benefits high-income and middle-income countries through productivity improvements, while growth instead increases in low-income countries as a result of increased physical capital accumulation. Additional growth effects are found for countries having larger equity markets.

Suggested Citation

  • Zhen Li, 2012. "On The Growth Effects Of Equity Market Liberalization," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(2), pages 59-77, June.
    • Handle: RePEc:jed:journl:v:37:y:2012:i:2:p:59-77
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    References listed on IDEAS

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    More about this item

    Keywords

    Equity Market Liberalization; Growth; Instrumental Variables;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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