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Financial Development, Openness and Institutions: Evidence from Panel Data

  • Badi H. Baltagi

    (Syracuse University and University of Leicester)

  • Panicos O. Demetriades

    (University of Leicester)

  • Siong Hook Law

    (University Putra Malaysia)

Utilising four annual panel datasets and dynamic panel data estimation procedures we find that trade and financial openness, as well as economic institutions are statistically important determinants of the variation in financial development across countries and over time since the 1980s. However, we find mixed support for the hypothesis that the simultaneous opening of both trade and capital accounts is necessary to promote financial development in a contemporary setting.

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Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0022.

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Date of creation: May 2007
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Handle: RePEc:wef:wpaper:0022
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  7. Ashoka Mody & Abdul Abiad, 2005. "Financial Reform; What Shakes It? What Shapes It?," IMF Economic Issues 35, International Monetary Fund.
  8. Ross Levine, 2003. "More on finance and growth: more finance, more growth?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 31-46.
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  11. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  12. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions As The Fundamental Cause Of Long-Run Growth," DOCUMENTOS CEDE 002889, UNIVERSIDAD DE LOS ANDES-CEDE.
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  16. Panicos O. Demetriades & Khaled A.Hussein, 1995. "Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries," Keele Department of Economics Discussion Papers (1995-2001) 95/13, Department of Economics, Keele University.
  17. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2001. "Emerging equity markets and economic development," Journal of Development Economics, Elsevier, vol. 66(2), pages 465-504, December.
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  24. Michael W. Klein & Giovanni Olivei, 1999. "Capital Account Liberalization, Financial Depth and Economic Growth," NBER Working Papers 7384, National Bureau of Economic Research, Inc.
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