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Who benefits from financial liberalization? Evidence from advanced and emerging market economies

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  • Saoussen Ben Gamra
  • Dominique Plihon

Abstract

In recent decades most countries have implemented significant reforms to foster financial liberalization. This article examines to what extent these reforms have benefited advanced economies and emerging market economies. We focus on four groups of countries: the G-7, other European countries, Latin America and East Asia over the period 1973-2006. We find evidence supporting the hypothesis that the different forms of financial liberalization affected growth differently in the four groups of countries. The main finding is that the benefits of financial liberalization are more important for advanced economies. In contrast, financial liberalization in emerging market economies has a weak positive impact on growth when its scope is limited, whereas full liberalization has been associated with slower economic growth.

Suggested Citation

  • Saoussen Ben Gamra & Dominique Plihon, 2010. "Who benefits from financial liberalization? Evidence from advanced and emerging market economies," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 3(1), pages 53-74.
  • Handle: RePEc:taf:macfem:v:3:y:2010:i:1:p:53-74
    DOI: 10.1080/17520840903076465
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    References listed on IDEAS

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    1. Sebastian Edwards, 2007. "Capital Controls, Sudden Stops, and Current Account Reversals," NBER Chapters,in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 73-120 National Bureau of Economic Research, Inc.
    2. Sebastian Edwards, 2001. "Capital Mobility and Economic Performance: Are Emerging Economies Different?," NBER Working Papers 8076, National Bureau of Economic Research, Inc.
    3. Abdul Abiad & Ashoka Mody, 2005. "Financial Reform: What Shakes It? What Shapes It?," American Economic Review, American Economic Association, vol. 95(1), pages 66-88, March.
    4. Frederic S. Mishkin, 2007. "Is Financial Globalization Beneficial?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 259-294, March.
    5. Cavallo, Eduardo A. & Frankel, Jeffrey A., 2008. "Does openness to trade make countries more vulnerable to sudden stops, or less? Using gravity to establish causality," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1430-1452, December.
    6. Carlos Arteta & Barry Eichengreen & Charles Wyplosz, 2001. "When Does Capital Account Liberalization Help More than It Hurts?," NBER Working Papers 8414, National Bureau of Economic Research, Inc.
    7. Hali J. Edison & Michael W. Klein & Luca Antonio Ricci & Torsten Sl√łk, 2004. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 1-2.
    8. Paolo Mauro & Torbjorn I. Becker & Jonathan David Ostry & Romain Ranciere & Olivier D Jeanne, 2007. "Country Insurance; The Role of Domestic Policies," IMF Occasional Papers 254, International Monetary Fund.
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