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Home-bias Politics, Financial Deregulation and Economic Growth: A Causal Relationship

  • He, Qichun

We re-examine the finance-growth nexus using the Chinese financial deregulation experience during the reform period 1981-1998. We use lagged home-bias political variables as instruments for financial deregulation. Dealing with weak instruments by LIML (limited-information maximum likelihood) estimation, we find that financial deregulation has a significant causal effect on economic growth. The result holds up when we control for conditional convergence, other growth determinants, and time and province effects.

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File URL: https://mpra.ub.uni-muenchen.de/34482/1/MPRA_paper_34482.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34482.

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Date of creation: 15 Oct 2011
Handle: RePEc:pra:mprapa:34482
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  1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
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  13. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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