Financial Liberalization: A Fourth Generation Thought

Global Journal of Business Research, v. 9 (3) p. 73-82

10 Pages Posted: 29 Jan 2016

See all articles by Sugeeth Patabendige

Sugeeth Patabendige

University of Kelaniya, Sri Lanka

Chathuri Senarath

University of Kelaniya, Sri Lanka

Date Written: 2015

Abstract

Empirical studies in the late 1980s and 1990s on financial liberalization lent support to the reforms carried out in line with the Mckinnon-Shaw hypothesis. Later evidence shows financial liberalization failed to achieve its desired results in many countries. Thus, the emphasis of current literature is to identify and explain the reasons for non-achievement of expected objectives to be realized through financial liberalization. An extensive literature survey done through this study reveals two main reasons for this failure. One is the incorrect policy procedure being followed in implementing financial liberalization referred to as a sequential problem. The other is to have policy inconsistencies during the reforming periods, referred to as a macroeconomic problem. This paper analyses the theoretical evolution of financial liberalization considering the empirical evidence presented by researchers through first, second and third generations of financial liberalization. The objective is to develop a more comprehensive analysis that can be identified as a fourth generation model of financial liberalization. Future researchers can make use of this model in their empirical analysis on measuring the success of financial reforms’ in various countries.

Keywords: Financial Liberalization, Mckinnon-Shaw Hypothesis, Sequential Problem, Macroeconomic Problem, Fourth Generation Model

JEL Classification: G000, G010

Suggested Citation

Patabendige, Sugeeth and Senarath, Chathuri, Financial Liberalization: A Fourth Generation Thought (2015). Global Journal of Business Research, v. 9 (3) p. 73-82, Available at SSRN: https://ssrn.com/abstract=2664308

Sugeeth Patabendige (Contact Author)

University of Kelaniya, Sri Lanka ( email )

Chathuri Senarath

University of Kelaniya, Sri Lanka ( email )

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