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Liberalization of capital controls and interest rates restrictions in the EU-15: did it affect economic growth?

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  • Diego Romero-Avila

Abstract

This article studies the effect that the process of capital controls lifting and interest rate deregulation have brought about on growth in the EU-15 over the period 1960-2001. The evidence supports the existence of a positive growth impact from the liberalization of both capital controls and interest rate restrictions. These financial liberalization measures affect growth even after controlling for other growth policies and they are robust to business cycle effects that could spuriously drive the relation. Some tentative evidence indicates that the liberalization of capital controls and the deregulation of interest rates have effected growth through the increase in the efficiency of financial intermediation.

Suggested Citation

  • Diego Romero-Avila, 2009. "Liberalization of capital controls and interest rates restrictions in the EU-15: did it affect economic growth?," Applied Financial Economics, Taylor & Francis Journals, vol. 19(20), pages 1625-1648.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:20:p:1625-1648
    DOI: 10.1080/09603100802599571
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    References listed on IDEAS

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    1. Sebastian Edwards, 2001. "Capital Mobility and Economic Performance: Are Emerging Economies Different?," NBER Working Papers 8076, National Bureau of Economic Research, Inc.
    2. Wyplosz, Charles, 1999. "Financial Restraints and Liberalization in Postwar Europe," CEPR Discussion Papers 2253, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Shigeki Ono & Ichiro Iwasaki, 2022. "The Finance-Growth Nexus in Europe: A Comparative Meta-Analysis of Emerging Markets and Advanced Economies," Eastern European Economics, Taylor & Francis Journals, vol. 60(1), pages 1-49, January.
    2. Moyo, Clement & Le Roux, Pierre, 2018. "Interest rate reforms and economic growth: the savings and investment channel," MPRA Paper 85297, University Library of Munich, Germany.

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