Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization

67 Pages Posted: 10 Apr 2003

See all articles by Graciela Kaminsky

Graciela Kaminsky

National Bureau of Economic Research (NBER); George Washington University - Department of Economics

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 3 versions of this paper

Date Written: October 2002

Abstract

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."

JEL Classification: F30, F32, F33, F34, F36, G12, G15

Suggested Citation

Kaminsky, Graciela and Schmukler, Sergio, Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization (October 2002). World Bank Working Paper No. 2912; IMF Working Paper No. 0334. Available at SSRN: https://ssrn.com/abstract=377801

Graciela Kaminsky

National Bureau of Economic Research (NBER)

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George Washington University - Department of Economics ( email )

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HOME PAGE: http://www.gracielakaminsky.com/

Sergio Schmukler (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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