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Financial Liberalization and Macroeconomic Performance: Empirical Evidence from Selected Asian Countries

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  • Muhammad Wajid Raza
  • Hassan Muhsin

Abstract

Financially repressed economy cannot grow with an increasing growth rate. That‟s why most of the developing countries move toward liberalized financial system. The basic objective of this paper is to provide a comparative analysis of Pakistan, China, and India financial sector liberalization and its impact on macroeconomic performance. This study uses descriptive statistics and Johansen co integration to provide cross country evidence of long run relationship between macroeconomic variables and financial openness. Shocks in short run are captured through VECM and the causal relation is investigated through Granger causality. Analysis shows that there exist long run relationship between financial liberalization and macroeconomic performance. Granger causilty provide evidence for direction of causality in all the three countries. Data is not available on quarterly basis. More variable must be included to measure financial development i.e. liquidity, non performing loans. Policy makers must introduce more financial reforms. Pakistan and china must focus on banking sector. Area of international trade and foreign direct investment must be strengthen.

Suggested Citation

  • Muhammad Wajid Raza & Hassan Muhsin, 2013. "Financial Liberalization and Macroeconomic Performance: Empirical Evidence from Selected Asian Countries," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 1(1), pages 16-27.
    • Handle: RePEc:rss:jnljfe:v1i1p2
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    Cited by:

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    2. Raza, Muhammad Wajid, 2013. "Affect of financial leverage on firm performance. Empirical evidence from Karachi Stock Exchange," MPRA Paper 50383, University Library of Munich, Germany.
    3. Sami Ur Rahman & Ihtesham Khan & Muhammad Faizan Malik, 2018. "The Impact of Political Activities on PSX: The Evidence from Pakistan," Global Economics Review, Humanity Only, vol. 3(2), pages 55-66, December.
    4. Archi Bhatia & Hans Raj Sharma, 2019. "Financial liberalization and channels of growth: a comparative study of developed and emerging economies," Indian Economic Review, Springer, vol. 54(1), pages 81-119, June.
    5. Zahoor Hussain Javed & Huma Huma Rao & Bader Akram & Muhammad Fayyaz Nazir, 2015. "Effect of Financial Leverage on Performance of the Firms: Empirical Evidence from Pakistan," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(1-2), pages 87-95, January-M.

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    More about this item

    Keywords

    Financial liberalization; financial depth. Economic growth;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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