Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization
George Washington University - Department of Economics; National Bureau of Economic Research (NBER)
Sergio L. Schmukler
World Bank - Development Research Group (DECRG)
World Bank Working Paper No. 2912; IMF Working Paper No. 0334
Kaminsky and Schmukler examine the short- and long-run effects of financial liberalization on capital markets. To do so, they construct a new comprehensive chronology of financial liberalization in 28 developed and emerging economies since 1973. The authors also construct an algorithm to identify booms and busts in stock market prices. The results indicate that financial liberalization is followed by more pronounced boom-bust cycles in the short run. But financial liberalization leads to more stable markets in the long run. Finally, the authors analyze the sequencing of liberalization and institutional reforms to understand the contrasting short- and long-run effects of liberalization.
This paper - a product of the Investment Climate Team, Development Research Group - is part of a larger effort in the group to understand financial globalization and integration. The study was jointly funded by the Latin American Regional Studies Program and the Research Support Budget under the research project "Understanding Capital Market Crises in Emerging Economies."
Number of Pages in PDF File: 67
JEL Classification: F30, F32, F33, F34, F36, G12, G15working papers series
Date posted: April 10, 2003
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.468 seconds