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

63 Pages Posted: 23 Jun 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: June 2003

Abstract

We examine the short- and long-run effects of financial liberalization on capital markets. To do so, we construct a new comprehensive chronology of financial liberalization in 28 mature and emerging economies since 1973. We also construct an algorithm to identify booms and busts in stock market prices. Our results indicate that financial liberalization is followed by more pronounced boom-bust cycles in the short run. However, financial liberalization leads to more stable markets in the long run. Finally, we analyze the sequencing of liberalization and institutional reforms to understand the contrasting short- and long-run effects of liberalization.

Suggested Citation

Kaminsky, Graciela and Schmukler, Sergio, Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization (June 2003). NBER Working Paper No. w9787. Available at SSRN: https://ssrn.com/abstract=418289

Graciela Kaminsky (Contact Author)

National Bureau of Economic Research (NBER)

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

Sergio Schmukler

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

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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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