On the growth effects of financial liberalization

Over the past few decades, a wave of financial liberalization has occurred throughout the world. This thesis studies the growth effects of financial liberalization reforms on economic growth. I use a new comprehensive database of financial reform, and conduct regression analysis with both country-level and industry-level data. At the country-level, I employ the OLS fixed effect models and GMM panel techniques, and find that liberalization has a positive and significant impact on the long run economic growth rates. At the industry-level, liberalization also contributes positively to the growth of real value-added and the level of investment in manufacturing industries. Further disaggregation of the growth effects reveals that it is more prominent in industries that have a higher level of external capital dependence and a higher R&D intensity. The findings confirm the hypotheses that liberalization reduces information barriers and transaction costs in the financial system.