What matters for financial development? Capital controls,institutions, and interactions |
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Authors: | Menzie D Chinn Hiro Ito |
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Institution: | 1. LaFollette School of Public Affairs, University of Wisconsin, Madison, United States;2. NBER, United States;3. Portland State University, United States |
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Abstract: | We investigate whether financial openness leads to financial development after controlling for the level of legal development using a panel encompassing 108 countries over the period 1980 to 2000. We also examine the issue of the optimal sequence of liberalization in both goods and financial markets. Our findings suggest that a higher level of financial openness spurs equity market development only if a threshold level of legal development has been attained. On the issue of sequencing, we find that trade openness is a prerequisite for capital account liberalization while banking system development is a precondition for equity market development. |
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Keywords: | F36 F43 G28 |
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