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International financial liberalization and industry growth

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  • Jonas Vlachos

    (The Research Institute of Industrial Economics and CEPR, Sweden)

  • Daniel Waldenström

    (Stockholm School of Economics, Sweden)

Abstract

The growth effects of international financial liberalization and integration are investigated using the methodology and data developed by Rajan and Zingales (1998). The main result is that industries highly dependent on external financing do not experience higher growth in value added in countries with liberalized financial markets. Liberalization does, however, increase the growth rates of both output and firm creation among externally dependent industries-given that the countries have reached a relatively high level of financial development. These results are consistent both with increased competition and increased outsourcing. Some tentative evidence points towards the latter explanation. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • Jonas Vlachos & Daniel Waldenström, 2005. "International financial liberalization and industry growth," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(3), pages 263-284.
    • Handle: RePEc:ijf:ijfiec:v:10:y:2005:i:3:p:263-284
    DOI: 10.1002/ijfe.272
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    Cited by:

    1. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
    2. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
    3. Chun Jiang & Amei Feng & Chunhuan Xiao, 2021. "Does Capital Account Liberalization Spur Entrepreneurship: The Role of Financial Development," Sustainability, MDPI, vol. 13(16), pages 1-19, August.
    4. Dennis P. Quinn & Hans-Joachim Voth, 2008. "A Century of Global Equity Market Correlations," American Economic Review, American Economic Association, vol. 98(2), pages 535-540, May.
    5. Maskus, Keith E. & Neumann, Rebecca & Seidel, Tobias, 2012. "How national and international financial development affect industrial R&D," European Economic Review, Elsevier, vol. 56(1), pages 72-83.
    6. Abdoul Rachid Issoufou Dogo, 2024. "Impact de l'intégration financière régionale sur le commerce intra régional des produits manufacturés dans la zone CEDEAO," African Development Review, African Development Bank, vol. 36(2), pages 292-305, June.
    7. Julia Tanndal & Daniel Waldenström, 2018. "Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang," Economica, London School of Economics and Political Science, vol. 85(338), pages 232-265, April.
    8. Hui Wang & Huifang Liu, 2017. "An Empirical Research of FDI Spillovers and Financial Development Threshold Effects in Different Regions of China," Sustainability, MDPI, vol. 9(6), pages 1-21, June.
    9. Eichengreen, Barry & Gullapalli, Rachita & Panizza, Ugo, 2011. "Capital account liberalization, financial development and industry growth: A synthetic view," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1090-1106, October.
    10. Wilairat TONGSIRI & Hiroyuki KOSAKA, 2008. "Asian Financial Liberalization and its Impact using Asian International Input-Output Model," EcoMod2008 23800143, EcoMod.
    11. Igan, Deniz & Kutan, Ali M. & Mirzaei, Ali, 2020. "The real effects of capital inflows in emerging markets," Journal of Banking & Finance, Elsevier, vol. 119(C).
    12. Nurullah Gur, 2015. "Financial Integration, Financial Dependence and Employment Growth," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 493-500.
    13. William R. Cline, 2010. "Financial Globalization, Economic Growth, and the Crisis of 2007-09," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 499, January.
    14. Bhushan Praveen Jangam & Vaseem Akram, 2020. "Does financial integration drive export diversification? Evidence from a cross-country analysis," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 13(1), pages 45-61, April.
    15. Nurullah Gur & Veysel Avşar, 2016. "Financial system, R&D intensity and comparative advantage," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(2), pages 213-239, March.
    16. Patrick Honohan, 2006. "Household Financial Assets in the Process of Development," WIDER Working Paper Series RP2006-91, World Institute for Development Economic Research (UNU-WIDER).
    17. Gehringer, Agnieszka, 2015. "Uneven effects of financial liberalization on productivity growth in the EU: Evidence from a dynamic panel investigation," International Journal of Production Economics, Elsevier, vol. 159(C), pages 334-346.
    18. Voth, Hans-Joachim & Quinn, Dennis, 2008. "Free Flows, Limited Diversification: Explaining the Fall and Rise of Stock Market Correlations, 1890-2001," CEPR Discussion Papers 7013, C.E.P.R. Discussion Papers.
    19. Muhammad Jawad & Zaib Maroof & Munazza Naz, 2019. "Industrial development factors: a comprehensive analysis of United States of America, European Union and China," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(4), pages 1763-1821, July.
    20. Bos, J.W.B. & Economidou, C. & Zhang, L., 2011. "Specialization in the presence of trade and financial integration: explorations of the integration-specialization nexus," Research Memorandum 026, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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