IngentaConnect Financial liberalisation in the emerging market economies

Author: K Das, Dilip

Source: Journal of Asset Management, Volume 3, Number 4, 1 March 2003 , pp. 345-359(15)

Abstract:

Financial repression and distortions were common in the past. The emerging market economies earnestly began liberalising their financial sectors, which had macro- and microeconomic as well as static and dynamic ramifications. Deregulation and liberalisation were responsible for creating an environment that engendered economic growth. The allocative efficiency view supported the liberalisation-growth nexus, while the newer `animal spirit' view considered this link fanciful. Although capital account liberalisation has been accused of creating domestic and global volatility, shunning it as a permanent policy measure has not won many supporters in the policy-making world. In this paper, the author provides empirical evidence to show that liberalisation of stock markets in the emerging market economies caused smoothening of the boom-bust cycles in the medium term, although the short-term effect of liberalisation was found to be very different.Journal of Asset Management (2003) 3, 345-359; doi:10.1057/palgrave.jam.2240088

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