Seminar Papers, Institute for International Economic Studies, Stockholm University
How Does Financial Liberalization affect Economic Growth?
Abstract: This paper assesses the effects of international financial
liberalization and banking crises on investments and productivity in a
sample of 93 countries (at its largest) observed between 1975 and 1999. I
provide empirical evidence that financial liberalization spurs productivity
growth and marginally affects capital accumulation. Banking crises depress
both investments and TFP. Both levels and growth rates of productivity
respond to financial liberalization and banking crises. The paper also
presents evidence of conditional convergence in productivity across
countries. However, the speed of convergence is unaffected by financial
liberalization. These results are robust to a number of econometric
Keywords: Capital account liberalization; equity market liberalization; financial development; banking crises; growth; productivity; investments; convergence; (follow links to similar papers)
JEL-Codes: C23; F43; G15; O40; (follow links to similar papers)
38 pages, May 10, 2005
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