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Will political liberalisation bring about financial development?

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  • Yongfu Huang

Abstract

This paper studies the e¤ect of political liberalisation on financial development in two steps. First, the paper examines whether political liberalisation in terms of institutional improvement promotes financial development, using a panel dataset of 90 developed and developing countries over 1960-99. The empirical evidence reveals a positive effect on financial development at least in the short-run, particularly for lower-income countries, ethnically divided countries and French legal origin countries. In the second part of the paper, a before-after event study approach is used to explore the impact of democratic transitions on financial development. It indicates that a democratic transformation is typically followed by an increase in financial development.

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  • Yongfu Huang, 2005. "Will political liberalisation bring about financial development?," Bristol Economics Discussion Papers 05/578, School of Economics, University of Bristol, UK.
    • Handle: RePEc:bri:uobdis:05/578
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    Cited by:

    1. Jalil, Abdul & Feridun, Mete, 2011. "The impact of growth, energy and financial development on the environment in China: A cointegration analysis," Energy Economics, Elsevier, vol. 33(2), pages 284-291, March.
    2. Pornpinun Chantapacdepong, 2007. "Determinants of the time varying risk premia," Bristol Economics Discussion Papers 07/597, School of Economics, University of Bristol, UK.
    3. Edgar Demetrio Tovar, 2011. "Globalización financiera y sus efectos sobre el desarrollo financiero," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 29(66), pages 80-127, December.
    4. Law, Siong Hook & Azman-Saini, W.N.W., 2008. "The Quality of Institutions and Financial Development," MPRA Paper 12107, University Library of Munich, Germany.
    5. Jalil, Abdul & Feridun, Mete & Ma, Ying, 2010. "Finance-growth nexus in China revisited: New evidence from principal components and ARDL bounds tests," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 189-195, April.
    6. Yongfu Huang, 2005. "What determines financial development?," Bristol Economics Discussion Papers 05/580, School of Economics, University of Bristol, UK.
    7. Yongfu Huang, 2011. "Private investment and financial development in a globalized world," Empirical Economics, Springer, vol. 41(1), pages 43-56, August.
    8. repec:agr:journl:v:4(605):y:2015:i:4(605):p:159-170 is not listed on IDEAS
    9. Hovhannes Toroyan & Mr. George C Anayiotos, 2009. "Institutional Factors and Financial Sector Development: Evidence from Sub-Saharan Africa," IMF Working Papers 2009/258, International Monetary Fund.
    10. Yongfu Huang, 2006. "On the political economy of financial reform," Bristol Economics Discussion Papers 06/586, School of Economics, University of Bristol, UK.
    11. Sanjaya Kumar LENKA, 2015. "Does Financial Development Influence Economic Growth in India?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(605), W), pages 159-170, Winter.
    12. Abdul Jalil & Mete Feridun, 2011. "Impact of financial development on economic growth: empirical evidence from Pakistan," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 16(1), pages 71-80.
    13. Nabamita Dutta, 2012. "Effect of the Political Regime on Asset Returns in Emerging Markets: An Empirical Investigation," South Asian Journal of Macroeconomics and Public Finance, , vol. 1(1), pages 135-156, June.
    14. Yallwe, Hagos Alem & Buscemi, Antonino, 2011. "Money laundry and financial development," MPRA Paper 32219, University Library of Munich, Germany.

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    More about this item

    Keywords

    Political liberalisation; Financial development.;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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