IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

The Future Of Financial Liberalization In South Asia

  • Ashima Goyal


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

Registered author(s):

    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.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Article provided by United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in its journal Asia-Pacific Development Journal.

    Volume (Year): 19 (2012)
    Issue (Month): 1 (June)
    Pages: 63-96

    in new window

    Handle: RePEc:unt:jnapdj:v:19:y:2012:i:1:p:63-96
    Contact details of provider: Postal: The United Nations Building, Rajadamnern Nok Avenue, Bangkok 10200
    Phone: (66-2) 288-1234
    Fax: (66-2) 288-1000
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. 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.
    2. Ricardo Caballero & Arvind Krishnamurthy, 2001. "Smoothing Sudden Stops," NBER Working Papers 8427, National Bureau of Economic Research, Inc.
    3. Ashima Goyal, 2009. "Global Financial Architecture : past and present arguments, advice, action," Finance Working Papers 22932, East Asian Bureau of Economic Research.
    4. Partha Sen, 2007. "Capital Inflows, Financial Repression And Macroeconomic Policy In India Since The Reforms," Working papers 157, Centre for Development Economics, Delhi School of Economics.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    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: (Mia Mikic)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.