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An Institutional Perspective to Finance and Development as an Alternative to Financial Liberalisation


  • Philip Arestis
  • Howard Stein


This paper argues that financial liberalisation as practiced recently worldwide engenders widespread financial crises precisely because of the weak foundations of its theoretical framework and poor empirical performance. Financial liberalisation is critically evaluated on both theoretical and empirical grounds, which suggests that an alternative is vitally necessary. Based on institutional theory,a new approach is proposed the focus of which is on ways to affect financial and banking transformation that is more consistent with economic development. We demonstrate how this theoretical approach can be applied in the real world, and indeed how the theoretical propositions we put forward in this contribution, very different from those of financial liberalisation, produce a more developmentally oriented set of policies for the countries that are prepared to pursue them.

Suggested Citation

  • Philip Arestis & Howard Stein, 2005. "An Institutional Perspective to Finance and Development as an Alternative to Financial Liberalisation," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(4), pages 381-398.
  • Handle: RePEc:taf:irapec:v:19:y:2005:i:4:p:381-398
    DOI: 10.1080/02692170500208459

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    References listed on IDEAS

    1. Light, Audrey & Ureta, Manuelita, 1995. "Early-Career Work Experience and Gender Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 121-154, January.
    2. Altonji, Joseph G. & Blank, Rebecca M., 1999. "Race and gender in the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 48, pages 3143-3259 Elsevier.
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    Cited by:

    1. Shahbaz, Muhammad & Lean, Hooi Hooi, 2012. "Does financial development increase energy consumption? The role of industrialization and urbanization in Tunisia," Energy Policy, Elsevier, vol. 40(C), pages 473-479.
    2. Amaira Bouzid, 2013. "Governance, Financial Liberalization And Economic Growth: Dynamic Panel Data Approach," Romanian Economic Business Review, Romanian-American University, vol. 8(2), pages 59-74, June.
    3. Muhammad, Shahbaz & Lean, Hooi Hooi, 2011. "Does Financial Development Increase Energy Consumption? Role of Industrialization and Urbanization in Tunisia," MPRA Paper 33194, University Library of Munich, Germany, revised 06 Sep 2011.
    4. Comlanvi Jude EGGOH, 2009. "Développement financier et croissance : Une synthèse des contributions pionnières," LEO Working Papers / DR LEO 442, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.


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