IDEAS home Printed from https://ideas.repec.org/a/unt/jnapdj/v19y2012i1p63-96.html
   My bibliography  Save this article

The Future Of Financial Liberalization In South Asia

Author

Listed:
  • Ashima Goyal

    () (Professor, Indira Gandhi Institute of Development Research, Mumbai, India)

Abstract

This paper overviews financial liberalization in three South Asian countries — Bangladesh, India and Pakistan — in order to derive lessons for future reforms. It investigates how freeing domestic financial markets, improving capital account convertibility, and restructuring regulations have impacted the process of financial liberalization in South Asia. The paper shows that the capital account was most liberalized in Pakistan, and that Bangladesh had the least market development of the three countries under consideration. The study also reveals that of the two similar-sized countries (i.e. Bangladesh and Pakistan), Pakistan had experienced several financial crises that had required “external rescue”. Bangladesh, in contrast, needed external rescue only once. India did better than Pakistan and Bangladesh, most likely because it followed a strategic plan according to which full capital account liberalization followed the deepening of domestic markets and improvements to government finances. The experience of the global crisis validated the Indian strategy and demonstrated that foreign entry, while beneficial, cannot resolve all issues. We conclude that deepening domestic markets and better domestic and international regulation are necessary prerequisites for full convertibility, and that these preconditions will be best met if future liberalization is adapted to domestic needs such as financial inclusion, infrastructure finance, and market deepening.

Suggested Citation

  • Ashima Goyal, 2012. "The Future Of Financial Liberalization In South Asia," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 19(1), pages 63-96, June.
  • Handle: RePEc:unt:jnapdj:v:19:y:2012:i:1:p:63-96
    as

    Download full text from publisher

    File URL: http://www.unescap.org/sites/default/files/chap-3-AshimaGoyal.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ashima Goyal, 2010. "Regulatory Structure for Financial Stability and Development," Finance Working Papers 22778, East Asian Bureau of Economic Research.
    2. Partha Sen, 2007. "Capital inflows, financial repression, and macroeconomic policy in India since the reforms," Oxford Review of Economic Policy, Oxford University Press, vol. 23(2), pages 292-310, Summer.
    3. Ashima Goyal, 2009. "Global Financial Architecture: Past and Present Arguments, Advice, Action," Working Papers id:2130, eSocialSciences.
    4. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2004. "Smoothing sudden stops," Journal of Economic Theory, Elsevier, vol. 119(1), pages 104-127, November.
    5. Ashima Goyal, 2005. "Incentives from exchange rate regimes in an institutional context," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2005-002, Indira Gandhi Institute of Development Research, Mumbai, India.
    6. Jonathan David Ostry & Atish R. Ghosh & Karl F Habermeier & Marcos Chamon & Mahvash S Qureshi & Dennis B. S. Reinhardt, 2010. "Capital Inflows; The Role of Controls," IMF Staff Position Notes 2010/04, International Monetary Fund.
    7. Menzie D. Chinn & Hiro Ito, 2002. "Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence," NBER Working Papers 8967, National Bureau of Economic Research, Inc.
    8. Ashima Goyal, 2006. "Regulation and Deregulation of the Stock Market in India," Chapters,in: Deregulation and its Discontents, chapter 9 Edward Elgar Publishing.
    9. Rana Ejaz Ali Khan & Qazi Muhammad Adnan Hye, 2013. "Financial liberalization and demand for money: a case of Pakistan," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(2), pages 175-198, July-Dece.
    10. Ashima Goyal, 2008. "The Structure of inflation, information and labour markets: Implications for monetary policy," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2008-010, Indira Gandhi Institute of Development Research, Mumbai, India.
    11. Masahiro Kawai, 2010. "Reform Of The International Financial Architecture: An Asian Perspective," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 55(01), pages 207-242.
    12. S. Narayan, 2009. "India," Chapters,in: The Political Economy of Trade Reform in Emerging Markets, chapter 7 Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nölke Andreas, 2013. "A Political Economy Explanation for Country Variation in IFRS Adoption – A Comment on ‘The International Politics of IFRS Harmonization’ by K. Ramanna," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(2), pages 1-8, January.
    2. Khan, Muhammad Azhar & Khan, Muhammad Zahir & Zaman, Khalid & Irfan, Danish & Khatab, Humera, 2014. "Questing the three key growth determinants: Energy consumption, foreign direct investment and financial development in South Asia," Renewable Energy, Elsevier, vol. 68(C), pages 203-215.

    More about this item

    Keywords

    Financial liberalization; capital account convertibility; regulation; inclusion; markets; South Asia; Bangladesh; Pakistan;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    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:unt:jnapdj:v:19:y:2012:i:1:p:63-96. 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: (Macroeconomic Policy and Development Division, ESCAP). General contact details of provider: http://edirc.repec.org/data/escapth.html .

    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.