Financial Openness and Productivity

By Geert Bekaert, Campbell R. Harvey, Christian Lundblad. 2009

393 citations recorded by the source corpus.

Financial openness is often associated with higher rates of economic growth. We show that the impact of openness on factor productivity growth is more important than the effect on capital growth. This explains why the growth effects of liberalization appear to be largely permanent, not temporary. We attribute these permanent liberalization effects to the role financial openness plays in stock market and banking sector development, and to changes in the quality of institutions. We find some indirect evidence of higher investment efficiency post-liberalization. We also document threshold effects: countries that are more financially developed or have higher quality of institutions experience larger productivity growth responses. Finally, we show that the growth boost from openness outweighs the detrimental loss in growth from global or regional banking crises.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/5e29cc1979aa01adcfb14984e77d3b8e9dff5e0a

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Remittances, growth and poverty: New evidence from Asian countries (2014, background): “This is in line with the new evidence which indicates that financial openness is likely to be associated with higher factor productivity and greater efficiency, and hence better economic performance (Bekaert et al. 2010).”
Growth, productivity and capital accumulation: The effects of financial liberalization in the case of European integration (2013, result): “Here, the results obtained by Bonfiglioli (2008), Kose, Prasad, and Terrones (2009) – using country level data – and Bekaert, Harvey, and Lundblad (2011) – in an industry-level investigation – seem to communicate an important message, namely, that it is mainly productivity growth that is positively…”
Democracy, Political Risks and Stock Market Performance (2015, positive): “The conflicts and tensions component sums the external and internal conflicts with the ethnic and religious tensions, on the one hand, whereas our quality of institutions component follows Bekaert et al. (2011) and sums corruption, law and order, and bureaucratic quality.”
Determinants of the link between financial and economic development: Evidence from a functional coefficient model (2014, neutral): “Specifically, in all cross sections, the null hypothesis of a panel unit root using the diagnostics of Levin et al. (2002) and Breitung (2000) is rejected.”
Thresholds in the Process of International Financial Integration (2009, methodology): “We use OLS regressions in the different stages of the partial linear estimation, with time and country fixed effects included where appropriate.11 The use of semi-parametric methods allows for a more flexible examination of the nature of threshold effects in the relationship between financial…”
Financial Regulation, Financial Globalization and the Synchronization of Economic Activity (2009, background): “The literature on the deter- 20 minants of world market segmentation (e.g. Kose et al. (2008); Bekaert et al. (2011)) has explored the effect of various institutional and financial development indicators (such as creditor’s rights, property rights institutions, private credit, etc.).”