Decomposing the Effects of Financial Liberalization: Crises vs. Growth

23 Pages Posted: 5 Jan 2007 Last revised: 30 Jun 2010

See all articles by Romain G. Rancière

Romain G. Rancière

University of Southern California

Aaron Tornell

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Frank Westermann

University of Osnabrueck - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: December 2006

Abstract

We present a new empirical decomposition of the effects of financial liberalization on economic growth and on the incidence of crises. Our empirical estimates show that the direct effect of financial liberalization on growth by far outweighs the indirect effect via a higher propensity to crisis. We also discuss several models of financial liberalization and growth whose predictions are consistent with our empirical findings.

Suggested Citation

Rancière, Romain G. and Tornell, Aaron and Westermann, Frank, Decomposing the Effects of Financial Liberalization: Crises vs. Growth (December 2006). NBER Working Paper No. w12806. Available at SSRN: https://ssrn.com/abstract=955239

Romain G. Rancière

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Aaron Tornell (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Bunche Hall 8387
Los Angeles, CA 90095-1477
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310-794-1686 (Phone)
310-825-9528 (Fax)

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

Frank Westermann

University of Osnabrueck - Department of Economics ( email )

Rolandstr. 8
Osnabrueck, D-49069
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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