Short-run Pain, Long-run Gain: The Effects of Financial Liberalization, Issue 9787
National Bureau of Economic Research, 2003 - Capital market - 28 pages
We examine the short- and long-run effects of financial liberalization on capital markets. To do so, we construct a new comprehensive chronology of financial liberalization in 28 mature and emerging economies since 1973. We also construct an algorithm to identify booms and busts in stock market prices. Our results indicate that financial liberalization is followed by more pronounced boom-bust cycles in the short run. However, financial liberalization leads to more stable markets in the long run. Finally, we analyze the sequencing of liberalization and institutional reforms to understand the contrasting short- and long-run effects of liberalization
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aftermath of financial aftermath of liberalization amplitude and duration amplitude of booms Balino Banking Crises boom crash booms and busts booms and crashes Bureau of Economic Business Cycles Capital Account Liberalization Capital Controls capital flows capital markets Central Bank Chile chronology Colombia currency cycle occurs deregulation developing countries domestic financial sector dummy variable equal duration of booms effects of financial emerging markets evidence financial cycles financial liberalization financial markets financial system full liberalization Highest Level whole Hong Kong IMF Washington immediate aftermath Insider Trading Laws institutional reforms Korea Latin America law and order Level whole sample liberalization episodes liberalization reform long-run liberalization mature markets National Bureau NBER Working Paper null hypothesis P-Value partially liberalized percent random walk real interest rate repression restrictions second sector Short-Run Liberalization simulated data stock market cycles stock prices Thailand variable that equals various issues Venezuela World Bank world real interest zero otherwise