Do Stock Market Liberalizations Cause Investment Booms?
As published in Journal of Financial Economics, Vol. 58, No. 1, October 2000
Posted: 21 Sep 1999
Abstract
Stock market liberalizations lead private investment booms. In a sample of 11 developing countries that liberalized their stock markets, 9 experience growth rates of private investment above their non-liberalization median in the first year after liberalizing. In the second and third years after liberalization, this number is 10 of 11 and 8 of 11, respectively. The mean growth rate of private investment in the three years immediately following stock market liberalization exceeds the sample mean by 22 percentage points. The evidence stands in sharp contrast to recent work that suggests capital account liberalization has no effect on investment.
Keywords: Capital Account Liberalization, Stock Market, Asset Prices, Emerging Markets, Investment, Growth
JEL Classification: F3, F4, E22, E44, G15, G31
Suggested Citation: Suggested Citation
Peter Blair Henry (Contact Author)
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