Stock Market Liberalizations: Financial and Macroeconomic Implications

By Norbert Funke, Nicola Fuchs-Schündeln

December 1, 2001

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Norbert Funke, and Nicola Fuchs-Schündeln. Stock Market Liberalizations: Financial and Macroeconomic Implications, (USA: International Monetary Fund, 2001) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Using a panel of 27 countries, we analyze the effects of stock market liberalization on financial and macroeconomic development. We find that 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 and a cumulative 4 percentage point increase in real GDP per capita growth. Growth tends to be higher if institutional reforms precede liberalization. In contrast to other studies, we also find evidence for a permanent growth effect of about 0.4 percent a year in an extended sample of 72 countries.

Subject: 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

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/193
Stock No:

WPIEA1932001
ISBN:

9781451859812
ISSN:

1018-5941

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