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Home-bias Politics, Financial Deregulation and Economic Growth: A Causal Relationship

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  • He, Qichun

Abstract

We re-examine the finance-growth nexus using the Chinese financial deregulation experience during the reform period 1981-1998. We use lagged home-bias political variables as instruments for financial deregulation. Dealing with weak instruments by LIML (limited-information maximum likelihood) estimation, we find that financial deregulation has a significant causal effect on economic growth. The result holds up when we control for conditional convergence, other growth determinants, and time and province effects.

Suggested Citation

  • He, Qichun, 2011. "Home-bias Politics, Financial Deregulation and Economic Growth: A Causal Relationship," MPRA Paper 34482, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:34482
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial Deregulation; Home-bias Politics; Causality; Growth;
    All these keywords.

    JEL classification:

    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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