Working Paper: NBER ID: w12806
Authors: Romain Ranciere; Aaron Tornell; Frank Westermann
Abstract: We present a new empirical decomposition of the effects of financial liberalization on economic growth and on the incidence of crises. Our empirical estimates show that the direct effect of financial liberalization on growth by far outweighs the indirect effect via a higher propensity to crisis. We also discuss several models of financial liberalization and growth whose predictions are consistent with our empirical findings.
Keywords: Financial Liberalization; Economic Growth; Financial Crises
JEL Codes: F3; F32; F33; F36; F43; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Probability of Financial Crises (G01) | Growth Costs Associated with Crises (H12) |
| Financial Liberalization (F30) | Growth Costs Associated with Crises (H12) |
| Financial Liberalization (F30) | Per Capita GDP Growth (O49) |
| Financial Liberalization (F30) | Probability of Financial Crises (G01) |