Overall effects of financial liberalization: financial crisis versus economic growth

ABSTRACT

The contribution of this work consists firstly in decomposing the effect of financial liberalization into a global direct positive effect on growth and an indirect negative effect via financial fragility and crisis. We show that the aggregate positive effect of financial liberalization outweighs the negative partial or temporary effect. Secondly, contrary to previous works, we distinguish many types of financial reforms. We found that equity market liberalization is the most important component in reducing economical costs associated with financial crisis. Thus, equity market liberalization is the most important favoring growth. Interest rate liberalization enhances significantly the probability of crisis leading to a short-run indirect effect more important than other financial reforms. Thirdly, we improved our work by addressing model uncertainty using Bayesian Model Averaging techniques to choose appropriate indicators for model crisis specification.     

Speculation-led economic development: a post-Keynesian interpretation of financial liberalization programmes in the Third World

The paper presents a post-Keynesian interpretation of the consequences of financial liberalization (FL) programmes in less developed countries (LDCs). The interpretation advanced here incorporates the new-Keynesian concepts of adverse selection and credit rationing into a post-Keynesian framework. It is argued that FL can lead to a particular kind of development, ‘speculation-led economic development’, which is characterized by a preponderance of risky investment practices and shaky financial structures. In addition, FL is likely to induce an increase in directly unproductive profit-seeking activities, a greater likelihood of financial crises, a misallocation of credit and, ultimately, diminished rates of real sector economic growth. Given the likelihood of these outcomes (as well as their realization in LDCs that have implemented FL), FL programmes are argued to be a poor foundation for stable and sustained real-sector economic growth, especially in the context of resource-scarce LDCs.     

Impact of domestic financial liberalization on economic growth in Pakistan

This paper attempts to investigate the domestic components of the financial liberalization process in Pakistan and develops an index of domestic financial liberalization capturing the important dimensions of reform process. Employing the multivariate co-integration technique and error-correction mechanism, the results indicate a positive impact of the index on economic growth in the long run, while its short run impact is found to be negative. Empirical findings highlight the importance of further financial deepening and financial intermediation, in a conducive environment, that are essential components to successfully implement reforms for growth stimulation.     

公司债券市场发展与经济增长:韩国的经验研究

债券市场在经济增长中的作用长期以来被世界各国的研究所忽视.本文首次同时引入银行、债券和股票市场这三个重要的金融部门,在控制了投资、进口、出口和消费支出等重要的实质经济变量以及虚拟变量--东亚金融危机的情况下,采用协整分析、误差修正模型和Granger因果检验法,对公司债券市场发展在韩国经济增长中的作用进行了实证研究.文章发现,公司债券和股票市场发展、银行信用规模扩张对韩国的经济增长具有显著的促进作用,出口、投资、总消费支出也是其经济增长的重要源泉,然而进口和东亚金融危机却具有负面影响.文章认为韩国属于典型的"经济增长拉动型"金融发展模式.     

Financial development and economic growth in Australia: An empirical analysis

The paper empirically examines the dynamic relationship between financial development and economic growth in Australia in terms of bank-based and market-based financial structure. A time-series approach using the VAR Model is used to provide evidence for the dynamic relationship. The paper provides empirical evidence on the causal impact of the financial market on the economic growth of the Australian economy. The results suggest that financial intermediaries and financial markets have different impacts on economic growth given their diverse roles in the domestic economy. In particular there is evidence of causality from economic growth to the development of the financial intermediaries. On the other hand, development in the financial markets causes economic growth but there is no evidence of any causality from economic growth to financial markets. The sensitivity test using different interest rates does not change the results.I Jel classification: O16, G18, G28I We would like to thank Tilak Abeysinghe and Rajagurn Gunasekaran for their helpful comments on the first draft. Also, we would like to thank the Editor, Prof. Baldev Raj, and two anonymous referees for their helpful comments.First version received: October 2001/Final version received: October 2002     

关于中国铝期货市场套期保值绩效的实证研究

套期保值是企业利用期货市场进行风险控制的重要过程。利用金融衍生产品进行风险管理的关键问题是确定套期保值比率。通过对中国沪铝期货套期保值绩效的实证研究发现基于DVECH-GARCH的动态套期保值比基于OLS的静态套期保值避险效果好。选择一定的套保模型进行对冲交易,铝加工企业能够有效地分散铝现货的市场风险,稳定企业生产经营。     

The effects of the subprime crisis on the Latin American financial markets: An empirical assessment

The aim of this article is to answer the following question: can the considerable rise in the volatility of the LAC stock markets in the aftermath of the 2007/2008 crisis be explained by the worsening financial environment in the US markets? To this end, we rely on a time-varying transition probability Markov-switching model, in which “crisis” and “non-crisis” periods are identified endogenously. Using daily data from January 2004 to April 2009, our findings do not validate the “financial decoupling” hypothesis since we show that the financial stress in the US markets is transmitted to the LAC's stock market volatility, especially in Mexico.     

An empirical analysis of the European Union's impact on Spanish economic performance

This paper investigates, for the first time, whether there is a relationship between international trade and international travel flows using time series econometric techniques. Using data for Australia and four important travel and trading partners, the USA, the UK, NZ and Japan, the paper tests three specific hypotheses: that business travel leads to international trade; that international trade leads to international travel; and that international travel, other than business travel, leads to international trade. Using cointegration and Granger-causality approaches the paper finds support for prior beliefs that there is a relationship between international travel and international trade, and suggests that this may be a fruitful area for further research.     

Quantifying the impact of financial development on economic development

How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as the intermediation spreads and the firm-size distributions for 1974 and 2004. It is then used to study the international data using cross-country interest-rate spreads and per-capita GDPs. The analysis suggests a country like Uganda could increase its output by 116 percent if it could adopt the world?s best practice in the financial sector. Still, this amounts to only 29 percent of the gap between Uganda?s potential and actual output.     

Financial market development,global financial crisis and economic growth: evidence from developing nations

Emerging and frontier markets in Africa have witnessed various economic and financial reforms aimed at integrating the domestic markets into the global financial market to attract investment. Whether these reforms promote high economic growth remains inconclusive. The paper applies the pooled mean group estimation technique to empirically re-investigate the link between financial market development, global financial crisis, and economic growth in selected African economies. The results strongly support our hypotheses that stock market and banking sector development promotes economic growth in the selected countries. Moreover, financial crisis reduce the positive effects of both the stock market and banking sector developments on economic growth. The study suggests that both the banking sector and stock market are important to deliver the long-run economic growth that the African region desired. Moreover, effort should be made to enact policy measures that would ensure development of the stock market which has received inadequate attention.     

Effects of the agricultural commodity and the food price volatility on economic integration: an empirical assessment

This paper empirically examines the effects of the global agricultural commodity price volatility and the food price volatility on the level of economic in     

金融市场发展与金融风险防范研究

随着防范和化解金融风险问题研究的深入,揭示和探讨金融风险的深层原因及根本性防范化解措施非常重要。本文分析了金融市场效率、信息不对称引发金融风险的两个深层原因及治理策略,并认为资产证券化是防范和化解金融风险的重要举措     

Financial liberalization,financial sector development and growth: Evidence from Malaysia

The objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of Malaysia. Using time series data from 1960 to 2001, we conduct cointegration and causality tests to assess the finance-growth link by taking the real interest rate and financial repression into account. The empirical evidence suggests that financial liberalization, through removing the repressionist policies, has a favorable effect in stimulating financial sector development. Financial depth and economic development are positively related; but contrary to the conventional findings, our results support Robinson's view that output growth leads to higher financial depth in the long-run.     

Political instability: Effects on financial development, roots in the severity of economic inequality

We here bring forward strong evidence that political instability impedes financial development, with its variation a primary determinant of differences in financial development around the world. As such, it needs to be added to the short list of major determinants of financial development. First, structural conditions first postulated by Engerman and Sokoloff (2002) as generating long-term inequality are shown here to have strong empirical support as exogenous determinants of political instability. Second, that exogenously-determined political instability in turn holds back financial development, even when we control for factors prominent in the last decade’s cross-country studies of financial development. The findings indicate that inequality-perpetuating conditions that result in political instability and weak democracy are fundamental roadblocks for international organizations like the World Bank that seek to promote financial development. The evidence here includes country fixed effect regressions and an instrumental model inspired by Engerman and Sokoloff’s (2002) work, which to our knowledge has not yet been used in finance and which is consistent with current tests as valid instruments. Four conventional measures of national political instability – Alesina and Perotti’s (1996) well-known index of instability, a subsequent index derived from Banks’ (2005) work, and two indices of managerial perceptions of nation-by-nation political instability – persistently predict a wide range of national financial development outcomes. Political instability’s significance is time consistent in cross-sectional regressions back to the 1960s, the period when the key data becomes available, robust in both country fixed effects and instrumental variable regressions, and consistent across multiple measures of instability and of financial development. Overall, the results indicate the existence of an important channel running from structural inequality to political instability, principally in nondemocratic settings, and then to financial backwardness. The robust significance of that channel extends existing work demonstrating the importance of political economy explanations for financial development and financial backwardness. It should help to better understand which policies will work for financial development, because political instability has causes, cures, and effects quite distinct from those of many of the key institutions most studied in the past decade as explaining financial backwardness.     

Socio-economic development and software piracy. An empirical assessment

The high rate of software piracy is a growing concern for software developers as well as businesses and governments. It is argued here that the piracy rate is influenced by expected benefits and costs to the pirates. A model is developed using a set of variables that may affect such benefits and costs and hence piracy rate in a country, and tested for a large sample of 53 countries. The results of this paper suggest that the existing socio-economic conditions and the lack of proper institutions in developing and emerging economies may be responsible for high software piracy rates. One may, therefore, infer that the current trends of globalization and socio-economic development may help software piracy in developing countries.     

Financial integration,capital market development and economic performance: Empirical evidence from Botswana

A substantial body of literature suggests that financial market development plays a significant role in economic growth through fostering savings mobilization, easing risk management, promoting technological transfer and reducing information and transaction costs. However, the effect of financial integration on growth remains an empirically controversial topic. This paper explores the impact of financial integration on economic growth in Botswana over the period 1974–2009. We do not find a direct, robust and statistically significant association between financial integration and economic growth in Botswana. However, our results show that financial integration is positively and significantly correlated with financial development in the Botswana economy. Although the relationship between financial integration and growth initially is, at best, weak, we believe this is not to say that financial integration does not promote economic growth, as it could do so indirectly through fostering financial development. Policy-wise, we observe that institutional quality, lower level of government spending and a stable macroeconomic environment are important determinants of both financial development and long-term economic growth. Thus, the Botswana government should continue strengthening and developing its capital market to international standards so as to attract both local and foreign investors and encourage foreign investment in the non-mining sectors. The government should ensure that financial reforms are coordinated, law enforcement authorities are strengthened and property rights are protected to reduce investment risks.     

Back to the futures: An assessment of market performance on the early Winnipeg Grain Exchange

In this paper, I offer a quantitatively rich, historical perspective with which to consider Western Canada's recent return to private grain marketing. I assess how futures markets on the Winnipeg Grain Exchange (WGE) performed before the Canadian Wheat Board, and I consider the extent to which this performance contributed to the Canadian government's decision to create the Board. I conclude, despite significant agrarian dissatisfaction with private grain marketing on the WGE, the Canadian government ultimately proscribed futures trading because it was incompatible with the CWB model, which the Canadian government needed in order to stabilize farm incomes, particularly in the aftermath of the Great Depression.     

The financial and economic performance of social banks

ABSTRACT

The financial crisis of 2008 provides evidence for the instability of the conventional banking system. Social banks may present a viable alternative for conventional banks. This article analyses the performance of social banks related to the bank business model, economic efficiency, asset quality, and stability by comparing social banks with banks where the difference is likely to be large, namely with the 30 global systemically important banks (G-SIBs) of the Financial Stability Board over the period 2000–2014. We also analyse the relative impact of the global financial crisis on the bank performance. The performance of social banks and G-SIBs is surprisingly similar.