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http://ssrn.com/abstract=1358574
 
 

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Financial Openness and Productivity


Geert Bekaert


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Campbell R. Harvey


Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Christian T. Lundblad


University of North Carolina Kenan-Flagler Business School

May 2010

AFA 2010 Atlanta Meetings Paper

Abstract:     
Financial openness is often associated with higher rates of economic growth. We show that the impact of openness on factor productivity growth is more important than the effect on capital growth. This explains why the growth effects of liberalization appear to be largely permanent, not temporary. We attribute these permanent liberalization effects to the role financial openness plays in stock market and banking sector development, and to changes in the quality of institutions. We find some indirect evidence of higher investment efficiency post-liberalization. We also document threshold effects: countries that are more financially developed or have higher quality of institutions experience larger productivity growth responses. Finally, we show that the growth boost from openness outweighs the detrimental loss in growth from global or regional banking crises.

Number of Pages in PDF File: 32

Keywords: financial openness, growth, liberalization, productivity

JEL Classification: F30, G15, O16, O47

working papers series





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Date posted: March 13, 2009 ; Last revised: September 19, 2012

Suggested Citation

Bekaert, Geert and Harvey, Campbell R. and Lundblad, Christian T., Financial Openness and Productivity (May 2010). AFA 2010 Atlanta Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1358574 or http://dx.doi.org/10.2139/ssrn.1358574

Contact Information

Geert Bekaert
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Campbell R. Harvey
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Christian T. Lundblad (Contact Author)
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

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