Search

The study examines the troika of financial liberalisation–volatility–information asymmetry to explore the linkage between financial liberalisation and return volatility across the globe. The financial liberalisation phenomenon was studied across three phases: liberalisation, post-liberalisation, and liberalisation plus post-liberalisation. The results indicate that volatility surged during the liberalisation phase for emerging economies, whereas it significantly declined during the post-liberalisation period. A declining pattern of volatility was observed during the post-liberalisation phase for developed economies. The conditional and unconditional volatility measures were highest during the liberalisation phase for emerging economies, whereas both the volatility measures were higher during the combined liberalisation phase for developed economies. There was evidence of negative asymmetric shock that lowered the volatility in emerging economies, in developed economies, and at the aggregate level.

This paper conducts a time-series econometric analysis in order to assess the effect of finance on the distribution of income in Portugal between 1977 to 2016 using annual data. A battery of bank and market-based proxies are used to measure financial indicators (private credit, foreign direct investment, money supply, stock market capitalisation, financial value added and financial openness) to provide a holistic representation of the financial system in terms of depth, access, and efficiency (Svirydzenka, 2016). To ensure robustness, two different measures of the Gini coefficient are employed to proxy income inequality (gross and net). School enrolment (as a proxy for human capital), inflation, real GDP, government spending and trade openness were used as control variables. Additionally, the estimations were conducted using the Generalised Method of Moments (GMM) estimator to control for endogeneity. Linear and non-linear estimations were performed to test the different hypotheses available in literature concerning the relationship between finance and income inequality. Our results suggest that bank-based financial indicators have reduced income inequality while market-based financial indicators have worsened income distribution in Portugal. Additionally, financial liberalisation has increased income inequality in Portugal. The majority of our models support a concave relationship between finance and inequality in Portugal. Este estudo pretende avaliar o efeito da financeirização na desigualdade de rendimentos em Portugal utilizando uma série temporal de dados anuais entre 1977 e 2016. Um conjunto de proxies financeiros foram utilizados para o efeito, nomeadamente, o crédito privado, o investimento directo estrangeiro, a oferta de Moeda, a capitalização bolsista, o valor acrescentado financeiro e o grau de abertura financeira, de modo a garantir uma representatividade adequada do Setor Financeiro em termos de profundidade, acesso e eficiência (Svirydzenka, 2016). Para efeitos de robustez, foram empregues duas medidas do coeficiente de Gini, mais especificamente, o coeficiente de Gini líquido e bruto. A taxa de escolarização (como proxy para o capital humano), a inflação, a taxa de crescimento real do PIB, a despesa pública e o grau de abertura comercial foram empregues como variáveis de controlo. As regressões foram estimadas utilizando o Método dos Momentos Generalizado (GMM) para controlar a endogeneidade. Foram estimados modelos lineares e não lineares de modo a testar as diferentes hipóteses disponíveis na literatura sobre a relação entre desigualdade de rendimentos e o desenvolvimento financeiro, nomeadamente, a hipótese linear (Positiva ou Negativa) e a hipótese não-linear (côncava ou convexa). Os resultados obtidos sugerem que o desenvolvimento financeiro bancário reduziu a desigualdade de rendimentos enquanto o desenvolvimento financeiro baseado nos mercados produziu o efeito oposto. Adicionalmente, a liberalização financeira gerou um efeito nefasto na distribuição de rendimentos em Portugal. A maioria dos modelos estimados apoiam a hipótese côncava.

This study aimed to analyse financial liberalisation, political stability, and economic determinants of Kenya’s real economic growth using time series data over the period of 1970–2016. The authors specified quadratic and interactive models to be estimated by employing a quantile regression analysis. The traditional and quantile unit root test was used in testing the stationarity issue. The co-integration findings indicated that the capital account openness and financial development impede on real economic growth; and the political stability also had potential influence on the real economic growth of Kenya. Interestingly, there is a nonlinear U-shape link between financial development and real economic growth that undermined the real economic growth at its onset, but as it advanced, it enhanced the growth of the country in the long run. The policymakers should ensure that the capital account is more liberalised so that it will continue to stimulate the financial development. In the same way, the liberalisation of the domestic financial market should be taken in earnest to overcome the negative effects of financial repression in totality, while maintaining the stable political atmosphere.

This paper provides a comprehensive review of the literature on the dual effect of financial liberalization over more than three decades, starting from the independent contributions of Ronald I. McKinnon and Edwards S. Shaw on this topic. In this regard, the paper revisits the effects of financial liberalization and governance on growth. Moreover, it presents a summary of current research in this area, covering the conclusions of the endogenous growth models, issues on volatility and the relationship between financial liberalization, institutions, governance and economic growth. To study data of 54 countries from 1985 to 2010 and because the nexus between financial liberalization and economic growth is nonlinear and depends on specific national factors especially institutions quality and governance, the Panel Smooth Transition Regression (PSTR) model is used. The main result of this study shows that a better contribution of financial liberalization to economic growth requires the interrelationship and the complementarity between financial liberalization and governance. Overall, regardless of the level of liberalization, output income is always higher with better governance and institutions. Key words: Economic growth, Financial liberalisation, Institutions quality and governance, PSTR.JEL: E44, F36, G21, G28. Rad daje sveobuhvatan pregled literature o dvojnom efektu finansijske liberalizacije tokom vise od tri decenije, pocevsi od nezavisnih doprinosa Ronalda I. McKinnona i Edvards S. Shav na ovu temu. U tom smislu, u radu se ponovo ispituje efekata finansijske liberalizacije i upravljanja na rast. Osim toga, rad predstavlja pregled trenutnih istraživanja u ovoj oblasti, prikazuje zakljucke endogenih modela rasta, pitanja o nestabilnosti i odnos između finansijske liberalizacije, institucija, upravljanja i ekonomskog rasta. Kako bi se proucili podaci o 54 zemalja od 1985. do 2010. godine i zato sto je veza između finansijske liberalizacije i ekonomskog rasta nelinearna i zavisi od specificnih nacionalnih faktora, posebno kvaliteta institucija i upravljanja, koristi se Panel Smooth Transition Regression (PSTR) model. Glavni rezultat ovog istraživanja pokazuju da bolji uticaj finansijske liberalizacije na ekonomski rast zahteva međuzavisnost i komplementarnost između finansijske liberalizacije i upravljanja. Sve u svemu, bez obzira na nivo liberalizacije, prihod je uvek veci u slucaju boljeg upravljanja i institucija. Kljucne reci: Ekonomski rast, Finansijska liberalizacija, Kvalitet i upravljanje institucijama, PSTR.

This study examines monetary change in a frontier economy, setting the changing regime of monetary governance in Pakistan against change in global markets. For Pakistan, an important consequence of the opening up of money and markets to the global economy has been new volatility in the rupee, which has spread risk across the economy. This thesis focuses on the expression of these risks in the everyday economy - amongst households and in local bazaars, in everyday transactions and money practices. Fieldwork indicates that in their use of money for exchange, as a store of value and as a unit of account, people are diversifying away from the rupee into staples like grain, cattle and land as alternatives to state money. But while conventional wisdom would cast this as a return to barter and point to the low levels of ‘financial inclusion’ in the banking sector as the problem, this thesis uses techniques of financial valuation and portfolio analysis to re-frame these ordinary people as strategic operators in financialised markets. These findings suggest that ordinary people move in and out of the rupee and other commodity ‘monies’ in informed and considered ways, casting subsistence commodities as objects of new risk management strategies, and the ‘unbanked’ amongst those at the forefront of financial innovation. Building on this evidence, the thesis contrasts household uses of various commodity monies with the sorts of data currently collected by Pakistan’s central bank. The analysis shows how the emergence of this calculating financial subject operates beneath the radar of central bank analysis, not only with regards to microeconomic strategies themselves, but also with regards to how monetary statistics understate monetary risk. The thesis develops the argument that the theories of money and of monetary policy that dominate central bank analysis and policy settings are not equipped to understand the way that ordinary, generally poor, people engage finance. Finally, the thesis explores how theories of money that inform central banking need to be rethought in light of the evidence assembled in this thesis of new risk linked to the liberalisation of the rupee and experienced in substantive ways in the everyday economy of ordinary people.

Brazil, as the rest of Latin America, has experienced three cycles of capital inflows since the collapse of the Bretton Woods system. The first two ended in financial crises, and at the time of writing the third one is still unfolding, although already showing considerable signs of distress. The first started with the aftermath of the oil-price increase that followed the 1973 ���Yom Kippur�� war; consisted mostly of bank lending; and finished with Mexico��s 1982 default (and the 1980s ���debt-crisis��). The second took place between the 1989 ���Brady bonds�� agreement (which also marked the beginning of neo-liberal reforms in most of Latin America) and the Argentinian 2001 crisis. This second cycle saw a sharp increase in portfolio flows and a rise of FDI, and ended up with four major crises (as well as the 1997 one in East Asia) as newly-liberalised middle-income countries struggled to deal with the problems created by the absorption of those sudden surges of inflows ��� Mexico (1994), Brazil (1999), and two in Argentina (1995 and 2001). Finally, the third inflow-cycle began in 2003 as soon as international financial markets felt reassured by the surprisingly neoliberal orientation of President Lula's government; this cycle intensified in 2004 with a (mostly speculative) commodity price-boom, and actually strengthened after a brief interlude following the 2008 global financial crash. The main aim of this paper is to analyse the Brazilian 1999-financial crises during the second inflow-cycle from the perspective of Keynesian/ Minskyian/ Kindlebergian financial economics. I will attempt to show that no matter how diversely the above mentioned countries tried to deal with the inflow absorption problem – and they did follow different routes, none more unique than Brazil – they invariably ended up in a major financial crisis. As a result (and despite the insistence of mainstream analysis and different 'generation' models of financial crises), these crises took place mostly due to factors that were 'intrinsic' ('endogenous' or 'inherent') to middle-income countries that opened up their capital account indiscriminately to over-liquid and excessively 'friendly-regulated' international financial markets. As such, these crises were both fully deserved and fairly predictable. Therefore, I shall argue that the general mechanisms that led to Brazil's 1999-financial crisis were in essence endogenous to the workings of an economy facing i) full financial liberalisation; ii) several surges of inflows, especially immediately after the Mexican 1994 and the East Asian 1997 crises – and as a spillover of the respective rescue packages –, following a new 'bubble thy neighbour' speculative-strategy by international financial markets, as ever more liquid, volatile, politically-reassured, and progressively unregulated financial markets were anxiously seeking (and allowed to create artificially) new high-yield investment opportunities via a new sequential speculative-strategy; an, Latin America

This paper investigates the link between financial liberalisation and growth for a cross – section of seventeen developing countries, including India, both theoretically and empirically. It also explores the different measures of capital account openness and the empirical evidence on the association between financial openness and growth. Theoretically capital account openness leads to growth through two main channels: increase in aggregate investment and an improvement in productivity and efficiency. Existing empirical evidence however suggests that the link between capital account openness and economic growth is weak. The paper uses a de jure measure of capital account convertibility, calculated as the proportion of capital flows to total flow of funds. The results find a positive association between financial openness and growth for some countries in the sample. However the investment effect is found to be weak or of no significance for the majority of the sample.

Financial markets play a significant role in an emerging market economy such as South Africa, especially after financial liberalisation. Financial liberalisation causes economies to interrelate across borders and between different sectors. The impact of this interrelationship can be captured by taking the different components of the financial market into account and relating these to the real sector, using the coincident indicator. It will be useful to identify an indicator representing the major components - equity market, capital market and the domestic financial sector - of the financial market in South Africa. This financial indicator will lead the coincident indicator, because the components of the financial indicator are available at a higher frequency than the components of the coincident indicator. This new indicator for South Africa will be of assistance in making more informed business decisions since it can be used to forecast turning points in the coincident indicator, i.e. the business cycle.

It is argued in this paper that although Keynes was not a development economist in the conventional sense, his theoretical apparatus and thinking about how capitalist economies function, and his proposals at Bretton Woods in 1944 for a new international monetary order, have relevance for the debates that take place today in development economics, particularly regarding financial liberalisation, the role of government in achieving full employment and the consequences on primary product price instability.Discute-se neste artigo que, embora Keynes não tenha sido um economista do desenvolvimento no sentido convencional, seu aparato teórico e pensamento sobre como as economias capitalistas funcionam e suas propostas em Bretton Woods, em 1944, para uma nova ordem monetária internacional têm relevância para os debates que ocorrem hoje sobre desenvolvimento econômico, particularmente no que diz respeito à liberalização financeira, o papel do governo em promover o nível de emprego e as conseqüências sobre instabilidade de preços de produtos primários.

Recentemente, alguns economistas brasileiros, notadamente Arida e Bacha, têm defendido que os controles de capitais poderiam desajustar o mercado cambial, aumentar a taxa de juros e comprometer a performance macroeconômica do país. Este trabalho tem por objetivo analisar a validade empírica dos argumentos levantados pelos autores. Para tanto, realizam-se alguns testes econométricos a fim de captar as possíveis implicações dos regimes da conta de capital sobre a economia. Os resultados encontrados não dão sustentação empírica à tese anteriormente defendida; ao contrário, a ausência de controles de capitais mais severos pode ter sido um dos fatores responsáveis pela excessiva volatilidade da taxa de câmbio e por a taxa de juros estar em patamares tão elevados. Além disso, a análise de painel realizada para diversos países não comprovou a hipótese de uma relação positiva entre conversibilidade da conta de capitais e crescimento.Recently some Brazilian economists, like Arida and Bacha, have defended the idea that the capital controls already in existence in the Brazilian economy can produce disequilibrium in exchange rate markets, increase the level of domestic rate of interest and reduce Brazil’s macroeconomic performance. The objective of this article is to make an empirical evaluation of these arguments. For such, we make some econometric tests with the aim to determine the implications of the capital account convertibility over the Brazilian economy. Empirical findings do not seem to support Arida and Bacha thesis. In fact, the low level of capital controls prevailing in the Brazilian economy during the 1990’s can be one of the explanations for the excessive volatility in the exchange rate and for the high level of domestic interest rate. We also make a panel regression for economic growth and capital account convertibility. The results of the regression do not support the existence of a positive relation between capital account convertibility and economic growth, as defended by Arida and Bacha.

Recentemente, alguns economistas brasileiros, notadamente Arida e Bacha, têm defendido que os controles de capitais poderiam desajustar o mercado cambial, aumentar a taxa de juros e comprometer a performance macroeconômica do país. Este trabalho tem por objetivo analisar a validade empírica dos argumentos levantados pelos autores. Para tanto, realizam-se alguns testes econométricos a fim de captar as possíveis implicações dos regimes da conta de capital sobre a economia. Os resultados encontrados não dão sustentação empírica à tese anteriormente defendida; ao contrário, a ausência de controles de capitais mais severos pode ter sido um dos fatores responsáveis pela excessiva volatilidade da taxa de câmbio e por a taxa de juros estar em patamares tão elevados. Além disso, a análise de painel realizada para diversos países não comprovou a hipótese de uma relação positiva entre conversibilidade da conta de capitais e crescimento. Recently some Brazilian economists, like Arida and Bacha, have defended the idea that the capital controls already in existence in the Brazilian economy can produce disequilibrium in exchange rate markets, increase the level of domestic rate of interest and reduce Brazil’s macroeconomic performance. The objective of this article is to make an empirical evaluation of these arguments. For such, we make some econometric tests with the aim to determine the implications of the capital account convertibility over the Brazilian economy. Empirical findings do not seem to support Arida and Bacha thesis. In fact, the low level of capital controls prevailing in the Brazilian economy during the 1990’s can be one of the explanations for the excessive volatility in the exchange rate and for the high level of domestic interest rate. We also make a panel regression for economic growth and capital account convertibility. The results of the regression do not support the existence of a positive relation between capital account convertibility and economic growth, as defended by Arida and Bacha.

A number of very significant changes took place in the international financial system at the beginning of the 1970s, as a result of changes in the relations of economic power between the most developed countries in the world. A number of new financial instruments appeared in response to the new conditions on the international currency and financial markets, with far-reaching implications for the efficiency of national economic policy, in particular on the three main segments - monetary, fiscal, and exchange rate policy. The process of financial liberalization began in the late sixties and early seventies and became a dominant characteristic of the final two decades of last century. The essence of financial liberalization is the elimination of the state?s influence on the extension of credit, interest rates, bank-ownership, and the free movement of international capital. In the process of financial liberalization, countries with developed market structures and powerful financial institutions were at a great advantage over countries whose financial sector was poorly or under-developed. As a result of their very different starting positions, the process of financial liberalization during the last two decades led to a doubling of the gap between the richest and the poorest countries. Two decades ago, the richest five countries in the world were 128 times richer than the five poorest countries. During those two decades, this became 249 times richer. A change in business philosophy and the mission and goals of companies could well have a progressive, development impact, with a view to reducing the wealth gap, particularly in regions and countries sidelined as regards development until now. Nevertheless, international economic and financial groups and institutional capacity-building in national governments, including the ability to carry out an efficient macroeconomic policy, will continue to have a vital role to play in stimulating development and reducing these enormous disparities.

This paper analyses the financial distortions – growth nexus in China using a tractable general equilibrium modelling approach in which heterogeneous private and state-owned firms interact. The focal points of the model are financial frictions and reallocations of factors of production across firms. The calibrated version of the model elicits the important message that the adoption of a comprehensive financial market reform package abolishing financial distortions will lead to substantial output gains. Thus, structural policies leading to more efficient allocation of factors of production will remain a key policy challenge in China in the years to come.

This paper analyzes the impact of financial sector policy changes on the dynamics of public debt. Using a panel of 89 countries from 1973 to 2005, we find that while the implementation of (large) financial liberalisation policies significantly raises the public debt growth rate, the adoption of financial re-regulation measures leads to a mild reduction of public debt. Looking at the different typologies of financial sector policy changes, we show that stricter banking supervision, privatisations and restrictions to international capital flows contribute to a fast decline of the growth rate of public debt. In contrast, the removal of entry barriers and the elimination of interest rate controls boost public debt growth. Finally, our results confirm that financial re-regulation is more likely to succeed when inflation is high, while large financial liberalisation measures significantly raise public debt when economic growth is low. Our results are robust to various estimation techniques and model specifications and to the inclusion of different control variables., COMPETE, QREN, FEDER, FCT

This paper analyses the financial distortions – growth nexus in China using a tractable general equilibrium modelling approach in which heterogeneous private and state-owned firms interact. The focal points of the model are financial frictions and reallocations of factors of production across firms. The calibrated version of the model elicits the important message that the adoption of a comprehensive financial market reform package abolishing financial distortions will lead to substantial output gains. Thus, structural policies leading to more efficient allocation of factors of production will remain a key policy challenge in China in the years to come. Publication

This thesis investigates the impact of financial liberalisation policies on finance-growth relationship and financial crises. Analysis of recent trends and economic performance of financially developed and stable economies raises at least two very important questions that seem to have strong analytical connections. The first question is associated with the link between financial development and economic growth and the second question focuses the possible association between the policies of financial liberalisation and financial vulnerability. In this thesis we aim to shed light on some of the aspects that have gained so much attention from academics and policy makers during the last two decades.First we address whether excessive liberalisation has caused financial development to lose its effectiveness in generating economic growth. We employ a dynamic panel data analysis for 88 countries over the period of 1973 to 2005. Our index for the financial sector liberalisation covers seven aspects: credit controls and reserve requirements, interest rate controls, entry barriers, state ownership, policies on securities markets, banking regulations and restrictions on capital market. We use a comprehensive financial development indicator constructed through principal component analysis of five different indicators: bank private credit to GDP ratio, liquid liability to GDP ratio, deposit money bank assets to total bank assets ratio, deposit money bank assets to GDP ratio, and bank credit to bank deposit ratio. The results indicate that the positive effect of financial development on long-run growth continues to decline as the financial sector becomes more liberalised. Our results are robust to changes in the financial development indicators and the dis-aggregation of the financial liberalisation index.Second, we examine the possibility for an optimal sequence of financial sector reforms that may reduce an economy’s vulnerability to financial crises. We construct a distance measure from the countries that followed a more gradual approach and liberalised their capital account at a later stage. Our analysis shows that the experience of the countries that delayed or followed a very gradual approach for the liberalisation of their capital accounts have high level of implications to those countries that allowed for shock approach or liberalised their capital account before bringing reforms in other sectors.

The financial sector development history of Zimbabwe has been dominated by episodes of financial repression. The main instruments of financial repression have included interest rate ceilings, selective credit rationing policies, restrictions on the remittance of capital, exchange controls and taxes on financial assets, zero-interest reserve requirements and a mesh of liquidity ratios. Inflation tax has also been used as a subtle form of financial repression. The rationale for financial repression has been based on the premise that government intervention would remedy the existing structural weakness of the market, channel resources to priorities sectors, which were considered as the engines of growth. Thus, the targeted sectors or companies that received subsidised credit (especially public enterprises) had easy access to scarce foreign currency (through import licences) and/or government guarantees (Chigumira, 2000). The episodes of financial repression have been accompanied by low savings, excessive credit rationing and low investment. This adversely affected the quality and quantity of investment as bankers adopted credit-rationing policies and practices that encouraged inefficient and/or capital intensive projects. Banks are also likely to have invested less in risk assessment and monitoring systems especially where banks were forced to lend to targeted sectors. There has been a burgeoning literature that questioned the wisdom of financial repression and provided financial liberalisation as an alternative framework for managing the financial sector. Within this literature financial repression has been considered as a second best strategy that is adopted when institutional constraints prevented Governments from collecting enough tax revenue to finance expenditure. Asset price distortions caused by financial repression have inhibited the development of the financial sector and undermined the sector’s contribution to economic development. In particular, administered deposit rate ceilings in an environment of high nominal inflation rates resulted in negative real interest rates, which curtailed savings mobilisation. In this regard measures that repress the financial sector consequently reduce the size of the banking system and stifle financial intermediation. The emergence and perpetuation of financial dualism (the co-existence of the formal and informal financial sectors), has in part been attributed to repressive financial sector policies among other factors. The financial price differentials and market segmentation caused by this dualistic structure caused further distortions in the economy. The main policy recommendation by McKinnon (1973) and Shaw (1973) and more recently from the endogenous financial development literature is to liberalise the financial sector. This entails decontrolling of interest rates, removing other controls that inhibited the development of the money and capital market. It was envisaged that positive real rates of interest would stimulate financial savings and thus expand real supply of credit within the financial sector. The increase in credit would consequently increase the volume of investment in productive sectors of the economy. This would ultimately stimulate growth not only through increased volume of investment but also due to increases in the average productivity of capital (see King and Levine 1993). Increase in productivity will arise because market determined interest rates, based on appropriate risk assessment will eliminate low risk and low-yielding investments in favour of high risk and high return investments. Financial liberalisation featured as a major component of the International Monetary Fund (IMF) and World Bank supported structural adjustment programmes (SAPs) that were adopted and implemented in a number of African countries in the 1980s. Country experiences with financial liberalisation have been varied and wide depending on a number of factors including the initial conditions; market failures and sequencing of the reforms, among others. In some instances, financial liberalisation induced financial sector deepening and in others financial crisis. This paper provides a synopsis of the international and country’s experience with financial liberalization/reform. The ultimate objective is to draw lessons from cross-country experiences on the design and implementation of financial reforms. Government of Zimbabwe, African Capacity Building Foundation and USAID.

During the 1980s and 1990s, many developing countries (DCs) have been engaged in far-reaching reforms of their financial systems, liberalising them and making them more market-oriented. This liberalisation, involving inter alia ‘financial de-repression’ has been inspired partly by the work of the McKinnon (1973) and Shaw (1973) [M-S] school. This paper suggests that, in addition to financial de-repression, there has been a major new element in the development of DC financial systems in recent years - the establishment and fast expansion of stockmarkets. These markets have played a key role in the internal as well as external financial liberalisation processes in leading DCs. Further, the paper finds that the actual behaviour of these markets in many countries has led to outcomes which undermine the effects of the higher real interest rates arising from 'financial de-repression'.

This article seeks to bring out the conceptual weaknesses of the assertion that free market mechanisms and liberal financial structures are necessary conditions for economic growth and stability, and to draw implications regarding financial regulatory policies required for the systemic viability. In this aim, it studies the very characteristics of a capitalist economy as a monetary economy and suggests an institutionalist analysis of the hypothesis of endogenous financial instability of Hyman P. Minsky. The process of financial liberalisation since the late 1970s led economies to a speculation-based accumulation regime. However, the sustainability of such a regime reveals to be extremely fragile since it suffers from the conflict of interest, fallacy of composition, absence of macreconomic vision and lack of consideration of the interconnectedness among market actors. Therefore these pitfalls of free and decentralised markets must be addressed towards collective rules and principles if one would prevent them from continuously resulting in systemic financial turnmoil. The main implication of such an analysis is that tough macro-prudential regulatory reforms must be implemented in order to create public-led supervision systems in which social efficiency should replace the individual economic efficiency criterion and lead policies to prevent speculative banking and finance and direct markets towards system-consistent behaviour.

The Chinese authorities have continued to make progress in internationalising China’s currency, the renminbi (RMB). In particular, the use of RMB for cross-border trade and investment transactions has increased noticeably over recent years and the market for RMB in a number of jurisdictions outside of mainland China – known as ‘offshore centres’ – has developed further. As part of this broader trend, the use of RMB by Australian entities has also increased somewhat, although there remains considerable scope for further growth. In order to facilitate this, a number of policy initiatives designed to allow the local RMB market to develop have recently been agreed with the Chinese authorities. Most notably, these include the establishment of an official RMB clearing bank in Australia and a quota that will allow Australian-based entities to invest in mainland China’s financial markets as part of the RMB Qualified Foreign Institutional Investor (RQFII) program.

There is a view that the financial sector of the post-war British economy was in need of reform that was postponed to the detriment of growth for 30 years until liberalisation started in full earnest after the election of 1979. There is another side of the story in this comparison. The first three decades of the post war period witnessed a decline in the share of wages accruing to the top percentile of earners. The trend was reversed around 1979, without any commensurate rise in output per person employed. The average growth rate of GDP in the second period was no greater than that in the first period because cyclical fluctuations were deeper. The de-regulation of the financial system allowed for recycling the wealth of the rich to contribute to housing inflation and rent seeking opportunities, creating an illusion of prosperity.

The Mexican programme of bank privatisation in the early 1990s was dictated not just by a desire for distancing government from the running of the economy but also by the need to raise money by selling public assets in favour of a particular fiscal stance. The conflict of objectives entailed in this liberalisation process contributed to the subsequent financial crisis entailing the re-nationalisation of banks after a short period of three years at a cost to the exchequer which was five times greater than the money raised at privatisation.

International audience; This paper explores the heterogeneous productivity impact of trade, product market and financial market policies over the last decade in China. The paper makes a critical distinction between downstream and upstream industries, focusing on the indirect effects of regulation in upstream industries on firm performance in downstream manufacturing industries. We identify the differential effect of these policies on firm productivity growth depending on how far incumbents are relative to the technological frontier. Trade and product market reforms are found to deliver stronger gains for firms that are closer to the industry-level technological frontier, while the reverse holds for financial market reforms. The key conclusion that can be derived from the empirical analysis is that further product, trade and financial market reforms would bring substantial gains in China and could therefore speed up the convergence process. Taken at face value, the empirical estimates would imply that aligning product, trade and financial market regulation to the average level observed in OECD countries would bring aggregate manufacturing productivity gains of respectively 9%, 3% and 6.5% after 5 years.

The end of the Bretton Woods era and the emergence of neoliberal economics resulted in profound transformations in domestic economies and international economic relations. The keystone of these transformations was the liberalisation of domestic and international financial markets. Faulty theoretical foundations and the resulting catastrophic policy failures prompted a vast literature by critical economists on the international financial architecture and domestic financial structures best suited for economic development. In recent decades, debate has also centred on what has been labelled “financialisation”, i.e. the increasingly central role played by financial markets and transactions in economic activity. In this paper we try to ascertain whether Argentina experienced a process of financialisation between 1990 and 2009 and what impact, if any, it has had on Argentine banking. We conclude that there has been a strong process of financialisation in Argentina in the post 2001-2002 crisis period. We also explore in a preliminary fashion potential reasons behind Argentine post-crisis financialisation. The paper concludes by suggesting that it is time to consider alternative banking arrangements if development finance is to become a policy priority. La fin de l’ère Bretton Woods et l’émergence d’une économie néolibérale ont eu pour conséquence de profondes transformations des économies nationales et des relations économiques internationales. La clé de voûte de ces transformations a été la libéralisation des marchés financiers nationaux et internationaux. Des références théoriques erronées et l’échec des politiques catastrophiques qui en découlaient ont donné lieu à une littérature importante par des économistes critiques sur l’architecture financière internationale et les structures financières nationales les mieux adaptées au développement économique. Depuis quelques décennies, le débat est également centré sur ce qui a été étiqueté « financiarisation », c’est-à-dire le rôle de plus en plus prépondérant joué par les marchés et les transactions financières dans l’activité économique. Nous allons tenter, dans cet article, de déterminer si l’Argentine a connu un processus de financiarisation entre 1990 et 2009 et l’impact, le cas échéant, de ce processus sur le système bancaire argentin. Nos conclusions établissent qu’il y a eu un intense processus de financiarisation en Argentine dans la période d’après crise 2001-2002. Nous recherchons également en préliminaire les raisons possibles de la financiarisation de l’Argentine dans l’après-crise. L’article conclut en soulignant qu’il serait temps, si le financement du développement devait devenir une politique prioritaire, d’envisager des pratiques bancaires alternatives. El fin de la era de Bretton Woods y de la emergencia de una economía neoliberal tuvo como consecuencia profundas transformaciones de las economías nacionales u de las relaciones económicas internacionales. La llave maestra de esas transformaciones fue la liberalización de los mercados financieros nacionales e internacionales. Las referencias teóricas erróneas y el fracaso de las políticas catastróficas que generaron dieron lugar a una literatura importante por parte de economistas críticos sobre la arquitectura financiera internacional más adaptadas al desarrollo económico. Desde hace varias décadas, el debate se centró sobre lo que se ha denominado “financiarizacion”, es decir el papel cada vez mas preponderante jugado por los mercados y las transacciones financieras en la actividad económica. Vamos a intentar en este artículo determinar si Argentina ha conocido un proceso de financiariacion entre 1990 y 2009 y, en ese caso, el impacto sobre el sistema bancario argentino. Nuestras conclusiones establecen que hubo un intenso proceso de financiarización en Argentina en el periodo posterior a la crisis de 2001-2002. Nosotros también buscaremos primeramente las razones posibles de la financiarización de Argentina luego de esa crisis. El artículo concluye destacando que ya habría llegado el momento de proponer prácticas bancarias alternativas en el caso de que el financiamiento del desarrollo llegara a ser una política prioritaria.

This study mainly aims to investigate the origin of the global financial crisis of 2007 (2007 GFC) in United States and in other advanced economies(AEs),its macroeconomic impact on the Emerging Market Economies(EMEs) and the critical analysis of their policy response. Study highlights the regulatory challenges of the post-crisis period and discusses the implications of newly introduced regulatory reforms for the EMEs.In this aim the thesis is delineated into four chapters. First chapter of the thesis sets the theoretical context of the dissertation and presents a critical review of orthodox (mainstream/neoliberal) and the heterodox approaches on financial fragility and crisis. After giving a critique of the orthodox approach, merits and relevance of Minsky's framework known as “Financial Instability Hypothesis”(FIH) are emphasized to understand the issue of fragility in capitalist economies. Second chapter of the thesis provides a compelling compendium of various explanations and consequences of the 2007 GFC focusing on its origination in the US housing market. Main dysfunctions of the financial markets and the regulatory system that led to the eruption of financial crisis are highlighted. Third chapter presents an in-depth analysis of the contagion of the 2007 GFC to EMEs. A comparative case studies analysis highlights the policy response of selected EMEs. Fourth chapter of the thesis investigates the various financial regulatory reforms introduced in the aftermath of the 2007 GFC. Analysis in this chapter indicates that introduced reforms (The Dodd- Franck Act of 2011 and the new Basel III Banking Standards) are rooted in neoliberal philosophy so would be unable to solve the issues of fragility and financial crisis. On the basis of our analysis in these four chapters, two major conclusions are emphasized. Firstly, the financial markets should not be left to the vicissitudes of free markets, and a relevant regulatory framework having macroprudential orientations must be implemented to replace the dominant free-market-based approach. Analytical and policy insights (“big government” and “big central bank”) endorsed by heterodox economist Hyman Minsky seem appropriate to understand and constrain the fragility of capitalist market economies. Secondly, it is advisable for EMEs to adopt policies keeping in view their own macroeconomic characteristics and the level of financial development and not by the blind faith in market liberalisation or the neoliberal policy paradigm., L'étude vise principalement à analyser l'origine de la crise financière globale de 2007 (2007 GFC) au États-Unis et dans les autres économies avancées (AE), ses impacts macroéconomiques sur les économies (de marché) émergentes (EME) ainsi qu'un examen critique de leurs réponses en termes de politique économique. L'étude met en évidence les défis en matière de régulation post crise et discute des implications des réformes qui ont été récemment introduites dans les EME. A cette fin, la thèse se décline en quatre chapitres. Le premier chapitre établit le contexte théorique de la thèse et présente un exposé critique des approches orthodoxe (dominante/néolibérale) et hétérodoxe concernant la fragilité financière et la crise. Après avoir examiné l'approche orthodoxe, on met en évidence le mérite et la pertinence du cadre d'analyse de Minsky connu en tant que « Hypothèses d'instabilité financières » (FIH), afin de comprendre la question de la fragilité dans les économies de marché. Dans le deuxième chapitre, la thèse propose un compte rendu exhaustif des explications et des conséquences de la crise de 2007 en mettant l'accent sur ses prémisses qui se trouvent sur le marché immobilier américain. On met également en évidence les principaux dysfonctionnements du marché financier et du système de régulation qui se trouvent à l'origine de la crise. Le troisième chapitre présente une analyse approfondie du processus de transmission de la crise de 2007 aux EME. Par la suite, on met en évidence les réactions en matière de politique économique (monétaire) de certaines EME sous forme d'étude comparative. Le quatrième chapitre analyse les diverses réformes de régulation financière introduites après la crise. L'examen indique que ces réformes (la loi Dodd Franck Act de 2011 et les nouveaux standards Bâle III) sont d'inspiration néolibérale et qu'elles ne peuvent pas résoudre le problème de fragilité et de crise financière. Sur la base de notre analyse développée au travers de ces quatre chapitres on met en évidence deux principaux résultats. Premièrement, les marchés financiers ne devraient pas être laissés aux vicissitudes des marchés (libres). Il faudrait mettre en place un cadre de régulation pertinent assorti des principes macroprudentiels qui puissent remplacer l'approche dominante de marchés libres efficients. Les orientations de politique et d'analyse de « gouvernement puissant » et de « banque centrale puissante », assumées par l'économiste hétérodoxe Hyman Minsky, semblent appropriées pour comprendre et contenir la fragilité des économies de marché. Ensuite, il est recommandable pour les EME d'adopter des politiques cohérentes avec leurs propres caractéristiques macroéconomiques et avec leur niveau de développement financier et non de s'attacher à une croyance aveugle dans la libéralisation du marché ou dans le paradigme néolibéral.

We characterize the effects of financial liberalization indices on OECD banking crises, controlling for the standard macro prudential variables that prevail in the current literature. We use the Fraser Institute’s Economic Freedom of the World database. This yields a variable that captures credit market regulations which broadly measures the restrictions under which banks operate. We then test for the direct impacts of some of its components, deposit interest rate regulations and private sector credit controls, on crisis probabilities and their indirect effects via capital adequacy. Over the period 1980 – 2012, we find that less regulated markets are associated with a lower crisis frequency, and it appears that the channel comes through strengthening the defence that capital provides. Deposit interest rate liberalisation adds to the strength of capital in protecting against crises. However, private sector credit liberalisation, appears to increase the probability of having a crisis, albeit not significantly. If policy makers are concerned about the costs of low risk events, they may wish to control private sector credit even if it has a probability of affecting significantly crises of between 10 and 20 per cent.

In this paper we empirically analyse the factors which determined consumer credit in Greece in the period before and after the financial liberalisation, while accounting for significant changes in structure due to the lifting of credit restrictions and the subsequent impressive boom of consumer loans. We use multivariate cointegration techniques to estimate a vector error correction model (VECM) and identify separate demand and supply relationships for consumer loans. We introduce demand and supply-related shifts in parameters through the inclusion of appropriate dummy variables and trends in the long-run relationships. We partly deviate from the typical Johansen procedure and estimate the model in two steps. We find that the theoretical exclusion and coefficient-size restrictions on the demand and supply cointegrating vectors are valid. Our results are consistent with the operation of a bank lending channel in Greece. We also find that the supply side was mostly responsible for the acceleration of consumer loan growth following credit liberalisation.

Latin America has recently experienced three cycles of capital inflows, the first two ending in major financial crises. The first took place between 1973 and the 1982 ‘debt-crisis’. The second took place between the 1989 ‘Brady bonds’ agreement (and the beginning of the economic reforms and financial liberalisation that followed) and the Argentinian 2001/2002 crisis, and ended up with four major crises (as well as the 1997 one in East Asia) — Mexico (1994), Brazil (1999), and two in Argentina (1995 and 2001/2). Finally, the third inflow-cycle began in 2003 as soon as international financial markets felt reassured by the surprisingly neo-liberal orientation of President Lula’s government; this cycle intensified in 2004 with the beginning of a (purely speculative) commodity price-boom, and actually strengthened after a brief interlude following the 2008 global financial crash — and at the time of writing (mid-2011) this cycle is still unfolding, although already showing considerable signs of distress. The main aim of this paper is to analyse the financial crises resulting from this second cycle (both in LA and in East Asia) from the perspective of Keynesian/ Minskyian/Kindlebergian financial economics. I will attempt to show that no matter how diversely these newly financially liberalised Developing Countries tried to deal with the absorption problem created by the subsequent surges of inflow (and they did follow different routes), they invariably ended up in a major crisis. As a result (and despite the insistence of mainstream analysis), these financial crises took place mostly due to factors that were intrinsic (or inherent) to the workings of over-liquid and under-regulated financial markets — and as such, they were both fully deserved and fairly predictable. Furthermore, these crises point not just to major market failures, but to a systemic market failure: evidence suggests that these crises were the spontaneous outcome of actions by utility-maximising agents, freely operating in friendly (light-touched) regulated, over-liquid financial markets. That is, these crises are clear examples that financial markets can be driven by buyers who take little notice of underlying values — investors have incentives to interpret information in a biased fashion in a systematic way. ‘Fat tails’ also occurred because under these circumstances there is a high likelihood of self-made disastrous events. In other words, markets are not always right — indeed, in the case of financial markets they can be seriously wrong as a whole. Also, as the recent collapse of ‘MF Global’ indicates, the capacity of ‘utility-maximising’ agents operating in unregulated and over-liquid financial market to learn from previous mistakes seems rather limited., Systemic market failure

This paper considers the effect of financial liberalisation on access to investment finance using firm level data covering 57 developing and transition countries. An index is presented which measures financial market liberalisation along the following policy dimensions: directed lending, credit controls and reserve requirements, state control of banking,openness of international financial flows, banking market entry, prudential regulation and supervision, and securities market development. Categorising firms as financially constrained across four measures, the results indicate that financial liberalisation reduces the probability of being credit constrained, with the effect strongest for young, domestic private small and medium sized enterprises. Increases in the degree of liberalisation, decrease the probability of being constrained by between 5 and 20 percent depending on the constraint definition. However, for Sub-Saharan Africa, the results indicate that financial liberalisation actually increases financing constraints for firms. This may help explain the stylised fact that despite a commitment to financial reform, the predicted growth benefits have not been realised in this region.

Latin America has recently experienced three cycles of capital inflows, the first two ending in major financial crises. The first took place between 1973 and the 1982 ‘debt-crisis’. The second took place between the 1989 ‘Brady bonds’ agreement (and the beginning of the economic reforms and financial liberalisation that followed) and the Argentinian 2001/2002 crisis, and ended up with four major crises (as well as the 1997 one in East Asia) — Mexico (1994), Brazil (1999), and two in Argentina (1995 and 2001/2). Finally, the third inflow-cycle began in 2003 as soon as international financial markets felt reassured by the surprisingly neo-liberal orientation of President Lula’s government; this cycle intensified in 2004 with the beginning of a (purely speculative) commodity price-boom, and actually strengthened after a brief interlude following the 2008 global financial crash — and at the time of writing (mid-2011) this cycle is still unfolding, although already showing considerable signs of distress. The main aim of this paper is to analyse the financial crises resulting from this second cycle (both in LA and in East Asia) from the perspective of Keynesian/ Minskyian/ Kindlebergian financial economics. I will attempt to show that no matter how diversely these newly financially liberalised Developing Countries tried to deal with the absorption problem created by the subsequent surges of inflow (and they did follow different routes), they invariably ended up in a major crisis. As a result (and despite the insistence of mainstream analysis), these financial crises took place mostly due to factors that were intrinsic (or inherent) to the workings of over-liquid and under-regulated financial markets — and as such, they were both fully deserved and fairly predictable. Furthermore, these crises point not just to major market failures, but to a systemic market failure: evidence suggests that these crises were the spontaneous outcome of actions by utility-maximising agents, freely operating in friendly (light-touched) regulated, over-liquid financial markets. That is, these crises are clear examples that financial markets can be driven by buyers who take little notice of underlying values — investors have incentives to interpret information in a biased fashion in a systematic way. ‘Fat tails’ also occurred because under these circumstances there is a high likelihood of self-made disastrous events. In other words, markets are not always right — indeed, in the case of financial markets they can be seriously wrong as a whole. Also, as the recent collapse of ‘MF Global’ indicates, the capacity of ‘utility-maximising’ agents operating in unregulated and over-liquid financial market to learn from previous mistakes seems rather limited.

This paper constructs a data set on stocks of bilateral external assets and liabilities for a group of 18 countries, including developed and emerging economies. The data set covers the years 1980 to 2005 and distinguishes between four asset classes: foreign direct investment, portfolio equity, debt, and foreign exchange reserves. A number of stylised facts emerge from it. There has been a remarkable increase in interconnectivity over the past two decades. Financial links have become larger and more frequent and countries have become more open. The global financial network is centred around a small number of nodes, which have many and large links. In addition, the network exhibits ‘small-world’ properties, such as high clustering and low average path length. The combination of high interconnectivity, a small number of hubs, and ‘small-world’ properties makes for a robust-yet-fragile system, in which disturbances to the key hubs would be rapidly and widely transmitted. The global financial network is centred around the United States and the United Kingdom, which have large links and are connected to most other countries. This contrasts with the global trade network, which is arranged in three clusters: a European cluster (centred on Germany), an Asian cluster (centred on China), and an American cluster (centred on the United States).

Financial liberalisation and innovation (FLIB) in Australia over the 1980s and 1990s provided the institutional backdrop for one of the most rapid increases in household balance sheets and house prices in the world. An equilibrium correction model of quarterly Australian house prices for 1972-2006 identifies the key long run drivers as real non-property income per house, the working age population proportion, the unemployment rate, two government policy changes, real and nominal interest rates and non-price credit conditions. All else equal, easing credit supply conditions attributable to FLIB directly raised the long run level of real house prices by around 51 per cent while higher real interest rates subtracted 29 per cent from long run prices. Real interest rates are shown to have a significant impact on real house prices after financial liberalisation but play no role before. These findings suggest that FLIB fundamentally relaxed binding credit constraints on households and enhanced opportunities for intertemporal smoothing. The model also explicitly captures short run overshooting dynamics in Australian house prices. Whenever lagged real house price growth is greater than about 4 per cent, for example during booms, house prices tend to display "frenzy" behaviour measured as a cubic of lagged house price changes.

We study the eþect of international financial integration on economic development when the quality of governance may be compromised by corruption. Our analysis is based on a dynamic general equilibrium model of a small economy in which growth is driven by capital accumulation and public policy is administered by government appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds, an opportunity that is made more attractive by financial liberalisation which, at the same time, raises efficiency in capital production. Our main results may be summarised as follows: (1) corruption is always bad for economic development, but its effect is worse if the economy is open than if it is closed; (2) the incidence of corruption may, itself, be affected by both the development and openness of the economy; (3) financial liberalisation is good for development when governance is good, but may be bad for development when governance is bad; and (4) corruption and poverty may co-exist as permanent, rather than just transitory, fixtures of an economy.

The theory of financial liberalisation advocates the freeing up of financial markets so as to ensure a more efficient allocation of investment and a consequent improvement in economic growth. Nigeria?s experience with financial liberalisation started in 1987 but this resulted in a banking crisis 5 years later. Using an index which tracks the specific policies associated with financial liberalisation, this paper conducts an empirical evaluation of the impact of financial liberalisation on Nigeria?s economic growth. The results show that liberalisation has exerted a significant positive effect on growth in the long run, thus lending credence to the views that even though financial liberalisation might result in financial fragility in the short run, it is growth-enhancing in the long run.

Long-span time series on credit by institutional sectors and industries are not readily available in Denmark. The paper constructs annual time series for credit to Danish residents by sector and industry 1951-2005 and explores the trends and cycles in credit during the past five decades. There seems to have been a structural shift in the relationship between growth in real credit and economic activity around 1980 that might be related to the development in the monetary and financial system broadly defined. In the post-1980 period characterised by increased influence from market forces due to financial liberalisation and internationalisation the swings in real credit growth have been very large relative to the economic growth compared to the pre-1980 period where credit rationing and exchange controls served as important economicpolicy instruments. The credit expansion during the last five decades has caused an upward trend in loan-tovalue ratios. However, throughout the entire period the macro level of non-financial sector indebtedness relative to the stock of real assets and net financial assets has been fairly low, even after the house price decline during the late 1980s and early 1990s. The process of financial liberalisation in Denmark has therefore been relatively smooth and has not raised any concern regarding financial stability seen from a macroeconomic point of view. There seems to have been a shift over time in the short-term cyclical behaviour of commercial credit to the various industries. Real credit to agriculture, industry and services were contemporaneous with private sector real GDP in the pre-1980 period but has lagged the business cycle with one year in the post-1980 period. This might reflect the more restricted access to credit in the pre-1980 period, which gave firms an incentive to raise loans at an early stage of the business cycle in order to be sure to have command over the funding necessary for their planned investments. Another possible explanation could be the increased significance of commercial and industrial foundations in the Danish economy. Foundations might be seen as patient owners without an urgent need for return on equity. In step with the increased capital accumulation in those foundations it might therefore have been possible for Danish firms to finance larger shares of their fixed investments in the initial stages of an upturn with own funds from retained earnings rather than loans from domestic and foreign credit institutes.

Using micro-level panel data, the paper analyses the impacts of short-term capital flow volatility on new fixed investment spending of publicly traded real sector firms in three major emerging markets that are Argentina, Mexico and Turkey. The empirical results including comprehensive sensitivity tests suggest that increasing volatility of capital inflows has an economically and statistically significant negative effect on new investment spending of private firms. Accordingly, a 10 per cent increase in capital flow volatility reduces fixed investment spending in the range of 1-1.7, 2.3-15.1, and 1 per cent in Argentina, Mexico and Turkey respectively.

ÖZPiyasalar üzerindeki fiyat ve miktar kontrollerinin azaltılması ya da kaldırılması veekonomilerin uluslararası sermaye akımlarına açılması sürecini ifade eden finansal liberasyon,gelişme yolunda olan diğer ülkelerde olduğu gibi, Türkiye'de de ekonominin özellikle dışticaret ve yabancı sermaye yatırımları alanlarında gelişme göstermesinde önemli katkılarsağlamıştır. Küreselleşme sürecinin hızla gelişmesinin etkisiyle zorunlu hale gelen finansalliberasyon sonucunda yabancı sermaye uluslararası piyasalarda serbestçe dolaşabilir halegelmiştir. Yabancı sermayenin; üretimin artmasına, yeni teknoloji ve yönetim bilgisininsağlanmasına, rekabeti geliştirerek ülke ekonomisinin dinamizm kazanmasına, ülkeye dövizgirişinin artmasına, ihracatın artmasına ve finansal piyasaların gelişmesine katkıda bulunmaözellikleri göz önünde bulundurulduğunda, Türkiye'de, özellikle 1980 sonrasında başlanıp2000'li yıllarda da geliştirilerek uygulanmakta olan finansal liberasyon politikalarınınTürkiye'de yabancı sermaye yatırımlarının artmasına paralel olarak olumlu gelişmelersağladığını söylemek mümkün olacaktır. ABSTRACTFinancial liberalisation means that the decrease or the raise in price and quantitycontrols which are established in markets. The term includes the process of nationalintegration with international capital flows. Financial liberalisation has improved Turkey?sfinancial system by effecting foreign trade and foreign investments that are observed indeveloping countries as well as in Turkey. Globalisation has necessitated financialliberalisation. Hence, foreign capital has involved in the area of international finance. Foreigncapital accquires its own advantages; it increases production and export, it provides newtechnology and management strategies and it stimulates the competition in nationaleconomics.After 1980s, Turkey has integrated with international economics through?liberalisation in economy? implementing financial liberal policies. In 2000s, these liberalpolicies has gathered momentum, since national economies has integrated much more whencompared with the beginning of globalisation ( in modern economic terms).International investments, therefore, have initiated regulations in Turkey?s economythat are considered to improvise Turkey?s position in both national and internationaleconomics.ANAHTAR SÖZCÜKLER/KEY WORDSLiberalizm : LiberalismFinansal Serbestleşme : Financial LiberalisationDoğrudan Yabancı Yatırımı : Foreign Directly nvestment (FDI)Küreselleşme : GlobalizationÇok-uluslu Şirketler : Multinational Corporations 231

We study the effect of international financial integration on economic development when the quality of governance may be compromised by corruption. Our analysis is based on a dynamic general equilibrium model of a small economy in which growth is driven by capital accumulation and public policy is administered by government- appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds, an opportunity that is made more attractive by financial liberalisation which, at the same time, raises efficiency in capital production. Our main results may be summarised as follows: (1) corruption is always bad for economic development, but its effect is worse if the economy is open than if it is closed; (2) the incidence of corruption may, itself, be affected by both the development and openness of the economy; (3) financial liberalisation is good for development when governance is good, but may be bad for development when governance is bad; and (4) corruption and poverty may co-exist as permanent, rather than just transitory, fixtures of an economy.

Vyksta plačios diskusijos, ar užsienio bankų investicijos į Centrinės ir Rytų Europos (CRE) šalių bankų sektorių veda prie didesnės konkurencijos ir bankų paskolų portfelio padidėjimo. Lietuva turi atvirą ekonomiką ir kreditų rinka yra atvira tarptautinei bankų konkurencijai. Lietuvoje bankų paskolų portfelis pastaraisiais metais augo labai greitai. Paskolų palūkanų kritimas buvo žymus ir bankai siūlė kreditus palankiomis sąlygomis. 87 proc. Lietuvos bankų sektoriaus priklauso užsienio investuotojams. Straipsnio tikslas yra ištirti ryšį tarp Lietuvos kredito rinkos vystymosi ir užsienio bankų atėjimo. Empiriniai tyrimai parodė, kad didelė užsienio kapitalo proporcija bankų sektoriuje CRE šalyse daugiausia turi teigiamą poveikį paskolų portfelio kokybei ir kiekiui. Ypač smarkiai užsienio kapitalo dalis Lietuvos bankininkystės sektoriuje augo 2000–2002 m. laikotarpiu. Savininkai užsieniečiai siūlo naujas bankininkystės paslaugas, skatina geriausios praktikos diegimą ir leidžia bankams plėsti jų veiklą. Atėjus užsienio kapitalui Lietuvos bankininkystės sektoriaus kapitalo pakankamumas sumažėjo nuo 17,6 proc. 1999 m. iki 12,3 proc. 2004 m. Tai rodo, kad prieš ateinant užsienio bankams, Lietuvos bankai buvo labiau konservatyvūs ir atsargūs. Lietuvos kredito rinka yra labai koncentruota. Maždaug 70 proc. paskolų portfelio yra sukoncentruota trijuose didžiausiuose Lietuvos bankuose. Tai gali padidinti sisteminės rizikos galimybę ir sumažinti konkurenciją bankų sektoriuje. There have been wide-ranging discussions on whether the investments of foreign banks into the banking sector of the Central and Eastern Europe countries (CEE) lead to greater competition and increase of the loan portfolio of the banks. Several empirical works have shown that a high proportion of foreign capital in the banking sector of CEE countries has generally positive effects on the quality and amount of loan portfolio of the banking sector, but there may also be some adverse effects. Lithuania has an open economy and the credit market is open to international banking competition. The loan portfolio of the banks in Lithuania was growing very rapidly during the last year. A drop in the loan interest rates was significant and banks offered credits under favourable conditions. At the same time, the Lithuanian banking sector is largely foreign owned. Foreign investors currently own approx. 87% of the share capital of banks in Lithuania. The aim of this paper is to investigate the link between the Lithuanian credit market development and the entry of foreign banks.

The weakness of the Japanese banking industry, suffering from acute problem of non-performing loans, prevents Japan from restoring sound growth rates despite having undertaken structural reforms and substantial fiscal policy efforts, and, through impairing transmission channels of monetary policy, it has also made ineffective efforts to stimulate the economy through "zero interest rates" and quantitative easing policy. Misunderstanding the roots of the banking crisis contributed greatly to its exceptional length and depth and prevented its early solution. Poor coordination and sequencing of liberalization of financial services together with macroeconomic policy mistakes have been responsible for the crisis. But the origins of those mistakes can be traced to the bureaucratic character of the country's policy-making process often lacking a comprehensive analysis of macroeconomic effects of a particular policy decision. Simple solution to the banking crisis in the form of eliminating non-performing loans burden, bailing out ailing financial institutions etc., if not accompanied by decisive steps restoring rationality to the public spending and resolving the problems arising from the presence of the government sponsored financial institutions, may not be sufficient to achieve sound growth and prevent similar crises in the future.

The weakness of the Japanese banking industry, suffering from acute problem of non-performing loans, prevents Japan from restoring sound growth rates despite having undertaken structural reforms and substantial fiscal policy efforts, and, through impairing transmission channels of monetary policy, it has also made ineffective efforts to stimulate the economy through „zero interest rates“ and quantitative easing policy. Misunderstanding the roots of the banking crisis contributed greatly to its exceptional length and depth and prevented its early solution. Poor coordination and sequencing of liberalisation of financial services together with macroeconomic policy mistakes have been responsible for the crisis. But the origins of those mistakes can be traced to the bureaucratic character of the country's policy-making process often lacking a comprehensive analysis of macroeconomic effects of a particular policy decision. Simple solution to the banking crisis in the form of eliminating non-performing loans burden, bailing out ailing financial institutions etc., if not accompanied by decisive steps restoring rationality to the public spending and resolving the problems arising from the presence of the government sponsored financial institutions, may not be sufficient to achieve sound growth and prevent similar crises in the future.

Cataloged from PDF version of article. Capital market liberalisation transforms segmented stock markets into integrated ones. Further impact should be expected on the dynamics of the rest of the domestic economy. This study presents evidence to that effect. A significant change after liberalisation is the emergence of world returns as an influential factor on other economic fundamentals. The information content of world returns influences emerging market returns prior to capital market liberalisation and this relation continues after capital market liberalisation. What is new after liberalisation is the influence of world returns on the dynamics of the domestic economy as a whole and its relation to stock returns. © 2003 Elsevier Inc. All rights reserved.

International audience; Depuis la fin des années 80, les économies émergentes ont amorcé un processus de libéralisation financière qui s'effectue dans un contexte d'accroissement significatif du nombre de crises bancaires. Ces dernières montrent notamment l'importance de la prise en compte du cadre institutionnel pour analyser les implications de la libéralisation financière. Dans ce papier nous cherchons à échapper à l'alternative excès de marché/insuffisance de marché en soulignant que les conditions de la viabilité des réformes financières résident dans la recherche de la complémentarité entre le marché et l'intermédiation dans les pays émergents. L'idée étant que la réponse à l'instabilité financière doit être appréhendée dans une dynamique institutionnelle où les économies émergentes utiliseraient les avantages d'un système intermédié pour renforcer le processus de marché. Mots clés : marchés émergents, crise financière, libéralisation financière, marché et institutions Abstract Financial Liberalization and Stability of the Financial System in Emerging Markets: the institutional dimension of financial crises Emerging economies which have implemented since the end of the 80's a financial liberalisation process have been confronted at the same time to banking crisis. These latter highlight the role played by the institutional framework in the financial liberalisation process. The objective of this paper is to go through the usual alternative too much/too little market in order to explain that the success of any liberalisation process relies on the complementarity of the market and the intermediation. The point is that the solution to financial instability is to be found into an institutional dynamics into which emerging economies may benefit from intermediation in order to enforce the market process.

This paper investigates the link between international financial integration and economic growth. In particular, we ask the following questions. What are the theoretical links between financial integration and growth? Is there any empirical evidence that an increase in financial integration is associated with higher economic growth at a cross-country level? Do different types of capital flows have different implications for growth? Existing empirical evidence suggests that the link between financial openness and economic growth is weak at best. While there is some evidence that financial liberalisation positively affects growth, this relationship is not robust. There is also some evidence that the positive impact of foreign investment on growth is conditional upon the existence of relatively developed domestic institutions and sound macroeconomic policy. This result is also not very robust and is sensitive to the measures employed to capture institutional development and the policy environment. To complement the existing research, we examine this issue with a particular emphasis on the composition of capital flows. Consistent with conventional wisdom, we find that both foreign direct investment and portfolio inflows enhance economic growth. By contrast, the effect of bank inflows is found to be mostly negative.

We collect data on a number of financial restraints, including restrictions on deposit and lending interest rates and reserve and liquidity requirements, from central banks of six developing countries. We estimate the effects of these policies on financial development, controlling for the effect of economic development and using standard econometric techniques. We find that the effects of financial policies vary considerably across our sample of countries. Our findings demonstrate that financial liberalisation is a much more complex process than has been assumed by earlier literature and its effects on financial development are ambiguous.

This paper provides a novel analysis of the South Korean financial crisis drawing on the findings of a unique survey of IMF/World Bank officials and South Korean economists. The survey reveals that over-optimism and inadequate recognition of financial risks inadvertently led to excessive risk taking by Korean financial intermediaries. It also indicates that the sources of over-optimistic assessments of East Asian economies, including Korea, were mainly to be found outside East Asia, including the IMF, the World Bank, western media and analysts. Weaknesses in risk management were the result of (i) lack of expertise in relation to handling the risks associated with capital flows, and (ii) disincentives to manage risks emanating from a relatively successful history of government provided safety nets for both industry and banking. Financial liberalisation widened risk-taking opportunities, by allowing lending to companies outside Korea. It also created additional disincentives for managing risk by intensifying competition and eroding bank franchise values. Finally, weaknesses in prudential regulation allowed bank portfolios to become much riskier, importantly in terms of maturity mis-matches between dollar-denominated assets and liabilities. The liquidity crisis, which followed the re-assessment of the South Korean economy by international lenders in late 1997, triggered a full-blown financial crisis because of the absence of an effective international lender of last resort.

This paper analyses the real effects of financial development subsequent to financial liberalisation in an economy with risk averse savers and learning by lending. Transition from full financial repression to full financial liberalisation might initially slow down the growth process or even induce a recession, whenever the initial level of valuable investments known by the financial instutions (informed capital ) is suficiently scanty. However, lending activity leads to accumulation of information (learning by lending) regarding valuable investments. This way, as intermediaries become experts, the allocative efficiency they are able to guarantee ameliorates so that, in the long run, the effects of financial liberalisation are eventually positive

The Macro-Integrated Agricultural-Sector modeling approach is introduced to analyze the economic effects of the post-1980 Turkish structural adjustment reforms on the agricultural economy. The distinguishing feature of the model is its capability in addressing simultaneously the real and financial macro aggregates and the micro-sectoral detail of agriculture in a consistent fashion. The modeling analysis discloses that the Turkish mode of adjustment has typically relied on taxation of agricultural incomes, and suggests that an investment program based on reinvesting the rural surplus within the agricultural economy is a superior option. Un modèle sectoriel agricole intégré d un modèle d'équilibre général est introduit pour analyser les effets des réfomes d'ajustement structurel après 1980 sur l'économie agricole. Le trait distinctif du modèle est sa capacité de traiter simultanément les variables réelles et financières et les détails du secteur agricole d'une façon consistante. Les simulations réalisées à l'aide du modèle montrent que le mode d'ajustement turc dépend de la taxation des revenus agricoles, et suggère qu'un programme d'investissement axé sur le réinvestissement des surplus ruraux dans l'économie agricole est une option supérieure.

Economic liberalisation is characterised by the entry of foreign companies and the emergence of new domestic institutions to compete with the existing institutions of lending, and there is a view that the process leads to greater efficiency, especially because foreign banks bring new expertise. Extracting information from accounts lodged with Ghana Central Bank, this paper ranks the cost efficiency of banks, Theil decomposition of the cost efficiency scores allows for a comparison of performance between banks under different types of ownership. There is pronounced differences in efficiency scores within and between groups by type of ownership, but foreign ownership, per se, is not the determining factor.

This paper examines the dynamics of corporate capital structures for listed non-financial firms in South Africa. The dynamic models of capital structure have been utilised to document several findings of empirical significance. First, transaction costs reduce dramatically in the post liberalisation regime, and the associated speed of adjustment is more pronounced, and statistically significant for the post liberalisation epoch. Second, financial liberalisation has a significant impact on the capital structure speed of adjustment. Third, the results confirm most of the theoretical predictions of capital structure theories; however, the relationship is more significant in the post liberalised regime. Finally, new evidence has been revealed on what determines the debt maturity structure of firms in a transitional economy.