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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. Jeremy Greenwood & Boyan Jovanovic, 1989. "Financial Development, Growth, and the Distribution of Income," NBER Working Papers 3189, National Bureau of Economic Research, Inc.
  2. Nouriel Roubini & Xavier Sala-i-Martin, 1991. "Financial Repression and Economic Growth," NBER Working Papers 3876, National Bureau of Economic Research, Inc.
  3. Aubhik Khan, 1999. "Financial development and economic growth," Working Papers 99-11, Federal Reserve Bank of Philadelphia.
  4. 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.
  5. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  6. Pablo Emilio Guidotti & Jose De Gregorio, 1992. "Financial Development and Economic Growth," IMF Working Papers 92/101, International Monetary Fund.
  7. Acemoglu, Daron & Zilibotti, Fabrizio, 1996. "Was Prometheus Unbound by Chance? Risk, Diversification and Growth," CEPR Discussion Papers 1426, C.E.P.R. Discussion Papers.
  8. Maurice Obstfeld, 1992. "Risk-taking, global diversification, and growth," Discussion Paper / Institute for Empirical Macroeconomics 61, Federal Reserve Bank of Minneapolis.
  9. 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.
  10. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
  11. Lee, Jaewoo, 1996. "Financial development by learning," Journal of Development Economics, Elsevier, vol. 50(1), pages 147-164, June.
  12. Michael B. Devereux & Gregor W. Smith, 1991. "International Risk Sharing and Economic Growth," Working Papers 829, Queen's University, Department of Economics.
  13. Vittas, Dimitri, 1991. "The impact of regulation on financial intermediation," Policy Research Working Paper Series 746, The World Bank.
  14. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
  15. Stiglitz, Joseph E, 1989. "Financial Markets and Development," Oxford Review of Economic Policy, Oxford University Press, vol. 5(4), pages 55-68, Winter.
  16. 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.
  17. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  18. Jappelli, Tullio & Pagano, Marco, 1992. "Saving, Growth and Liquidity Constraints," CEPR Discussion Papers 662, C.E.P.R. Discussion Papers.
  19. 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.
  20. repec:cup:macdyn:v:5:y:2001:i:3:p:413-33 is not listed on IDEAS
  21. Bencivenga, V.R. & Smith, B.D., 1988. "Financial Intermediation And Endogenous Growth," RCER Working Papers 124, University of Rochester - Center for Economic Research (RCER).
  22. 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.
  23. 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.
  24. Fry, Maxwell J, 1997. "In Favour of Financial Liberalisation," Economic Journal, Royal Economic Society, vol. 107(442), pages 754-70, May.
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