Output Growth and Fluctuations: The Role of Financial Openness
57 Pages Posted: 22 Aug 2011
Date Written: August 16, 2011
Abstract
I analyze output growth, volatility, and skewness as the joint outcomes of financial openness. Using an industry panel of 53 countries over 45 years, I find that financial openness increases simultaneously mean growth and the negative skewness of the growth process. The increase in output skewness appears to come from a more negatively skewed distribution of investment, TFP, and new business creation. The growth benefits of financial liberalization are augmented, and its costs associated with higher probability of rare large contractions are mitigated by deep credit markets and by strong institutions. The main result of the paper holds in aggregated data.
Keywords: Financial openness, growth, volatility, skewness, development
JEL Classification: E32, F30, F36, F43, G15
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Financial Globalization: A Reappraisal
By M. Ayhan Kose, Eswar S. Prasad, ...
-
Financial Globalization: A Reappraisal
By M. Ayhan Kose, Eswar S. Prasad, ...
-
Financial Globalization: A Reappraisal
By M. Ayhan Kose, Eswar S. Prasad, ...
-
Economic Effects and Structural Determinants of Capital Controls
-
What Matters for Financial Development? Capital Controls, Institutions, and Interactions
By Menzie David Chinn and Hiro Ito
-
What Matters for Financial Development? Capital Controls, Institutions, and Interactions
By Menzie David Chinn and Hiro Ito
-
Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization
-
Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization
-
Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization