Stock Market Liberalizations: Financial and Macroeconomic Implications

IMF Working Papers, December 1, 2001

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Stock Market Liberalizations: Financial and Macroeconomic Implications

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Bibliographic details

• Authors: Norbert Funke, Nicola Fuchs-Schündeln
• Published: December 1, 2001
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451859812.001

Summary of main findings

• Using a panel of 27 countries, liberalization is associated with a short-term increase in real private investment growth of about 14 percentage points cumulatively in the four years following liberalization.
• The same analysis finds a cumulative 4 percentage point increase in real GDP per capita growth in the four years following liberalization.
• Growth tends to be higher if institutional reforms precede liberalization.
• In an extended sample of 72 countries, the authors find evidence for a permanent growth effect of about 0.4 percent a year.

Methodology and sample

• Panel analysis of 27 countries for primary estimates.
• Extended-sample analysis covering 72 countries to assess long-run/permanent growth effects.

Financial and macroeconomic implications

• Short-term financial channel:
  • Real private investment growth: about 14 percentage points cumulatively in the four years after liberalization.
• Short-term macroeconomic channel:
  • Real GDP per capita growth: cumulative increase of 4 percentage points in the four years after liberalization.
• Long-term/permanent effect (extended sample):
  • Permanent growth effect: about 0.4 percent a year.

Conditional factors and robustness

• Timing and sequencing matter:
  • Growth outcomes tend to be higher when institutional reforms precede stock market liberalization.

Keywords and subject focus (as listed)

• Subjects: Credit ratings, Financial markets, Financial sector development, Market capitalization, Money, National accounts, Private investment, Stock markets
• Keywords: Africa, Asia and Pacific, capital account liberalization, Credit ratings, dependent variable, financial liberalization, Financial sector development, growth effect, liberalization coefficient, liberalization dummy, liberalization effect, Market capitalization, Private investment, regulation, stock market liberalization, Stock markets, trade liberalization, WP

Content in this bundle

• Stock Market Liberalizations: Financial and Macroeconomic Implications - WP/01/193
  • Stock Market Liberalizations: Financial and Macroeconomic Implications - WP/01/193 (Markdown version)
  • Stock Market Liberalizations: Financial and Macroeconomic Implications - WP/01/193 (PDF)