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Financial Institutions' Expertise and Growth Effects of Financial Liberalisation

This paper analyses the real effects of financial development subsequent to financial liberalisation in an economy with risk averse savers and learning by lending. Transition from full financial repression to full financial liberalisation might initially slow down the growth process or even induce a recession, whenever the initial level of valuable investments known by the financial instutions (informed capital ) is suficiently scanty. However, lending activity leads to accumulation of information (learning by lending) regarding valuable investments. This way, as intermediaries become experts, the allocative efficiency they are able to guarantee ameliorates so that, in the long run, the effects of financial liberalisation are eventually positive

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Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200105.

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Date of creation: 2001
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Handle: RePEc:cns:cnscwp:200105
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  1. Roubini, Nouriel & Sala-i-Martin, Xavier, 1992. "Financial repression and economic growth," Journal of Development Economics, Elsevier, vol. 39(1), pages 5-30, July.
  2. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  3. Vittas, Dimitri, 1991. "The impact of regulation on financial intermediation," Policy Research Working Paper Series 746, The World Bank.
  4. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
  5. Pablo Emilio Guidotti & Jose De Gregorio, 1992. "Financial Development and Economic Growth," IMF Working Papers 92/101, International Monetary Fund.
  6. repec:cup:macdyn:v:5:y:2001:i:3:p:413-33 is not listed on IDEAS
  7. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
  8. Stiglitz, Joseph E, 1989. "Financial Markets and Development," Oxford Review of Economic Policy, Oxford University Press, vol. 5(4), pages 55-68, Winter.
  9. Nouriel Roubini & Xavier Sala-i-Martin, 1992. "A Growth Model of Inflation, Tax Evasion, and Financial Repression," NBER Working Papers 4062, National Bureau of Economic Research, Inc.
  10. Bencivenga, V.R. & Smith, B.D., 1988. "Financial Intermediation And Endogenous Growth," RCER Working Papers 124, University of Rochester - Center for Economic Research (RCER).
  11. Jaramillo, Fidel & Schiantarelli, Fabio & Weiss, Andrew, 1993. "The effect of financial liberalization on allocation of credit : panel data evidence for Ecuador," Policy Research Working Paper Series 1092, The World Bank.
  12. Fry, Maxwell J, 1997. "In Favour of Financial Liberalisation," Economic Journal, Royal Economic Society, vol. 107(442), pages 754-70, May.
  13. Aubhik Khan, 1999. "Financial development and economic growth," Working Papers 99-11, Federal Reserve Bank of Philadelphia.
  14. Acemoglu, Daron & Zilibotti, Fabrizio, 1996. "Was Prometheus Unbound by Chance? Risk, Diversification and Growth," CEPR Discussion Papers 1426, C.E.P.R. Discussion Papers.
  15. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  16. Maurice Obstfeld, 1992. "Risk-taking, global diversification, and growth," Discussion Paper / Institute for Empirical Macroeconomics 61, Federal Reserve Bank of Minneapolis.
  17. Devereux, Michael B & Smith, Gregor W, 1994. "International Risk Sharing and Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 535-50, August.
  18. Cho, Yoon Je, 1989. "Finance and Development: The Korean Approach," Oxford Review of Economic Policy, Oxford University Press, vol. 5(4), pages 88-102, Winter.
  19. Delano Villanueva & Abbas Mirakhor, 1990. "Strategies for Financial Reforms: Interest Rate Policies, Stabilization, and Bank Supervision in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 37(3), pages 509-536, September.
  20. Jappelli, Tullio & Pagano, Marco, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 83-109, February.
  21. Saint-Paul, G., 1990. "Technological Choice, Financial Markets and Economic Development," DELTA Working Papers 90-30, DELTA (Ecole normale supérieure).
  22. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  23. Lee, Jaewoo, 1996. "Financial development by learning," Journal of Development Economics, Elsevier, vol. 50(1), pages 147-164, June.
  24. Fry, Maxwell J, 1989. "Financial Development: Theories and Recent Experience," Oxford Review of Economic Policy, Oxford University Press, vol. 5(4), pages 13-28, Winter.
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