Financial Liberalization, Bank Crises and Growth: Assessing the Links

Economics and Finance Working Paper No. 567

28 Pages Posted: 23 Jul 2007

See all articles by Alessandra Bonfiglioli

Alessandra Bonfiglioli

Universitat Pompeu Fabra, Economics Department

Caterina Mendicino

Bank of Portugal; European Central Bank (ECB) - Directorate General Research

Date Written: October 2004

Abstract

This paper studies the effects of financial liberalization and banking crises on growth. It shows that financial liberalization spurs on average economic growth. Banking crises are harmful for growth, but to a lesser extent in countries with open financial systems and good institutions. The positive effect of financial liberalization is robust to different definitions. While the removal of capital account restrictions is effective by increasing financial depth, equity market liberalization affects growth directly. The empirical analysis is performed through GMM dynamic panel data estimations on a panel of 90 countries observed in the period 1975-1999.

Keywords: Capital account liberalization, equity market liberalization, financial development, institutions, dynamic panel data

JEL Classification: C23, F02, G15, O11

Suggested Citation

Bonfiglioli, Alessandra and Mendicino, Caterina, Financial Liberalization, Bank Crises and Growth: Assessing the Links (October 2004). Available at SSRN: https://ssrn.com/abstract=1002285 or http://dx.doi.org/10.2139/ssrn.1002285

Alessandra Bonfiglioli (Contact Author)

Universitat Pompeu Fabra, Economics Department ( email )

Ramon Trias Fargas, 25-27
Barcelona, E-08005
Spain

Caterina Mendicino

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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