Does Financial Liberalization Cause Economic Growth? A Meta-analysis Review

Latib, Noor Aznaim Abd; Mohamad, Siti Nor Amira

doi:10.6007/ijarems/v12-i1/15749

Cited by 4 publications

(8 citation statements)

References 4 publications

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“…Prior studies (Orji et al, 2015;Haruna & Abu Bakar, 2021;Kudaisi et al, 2021) reported that increased liberalization of an economy tends to accelerate economic growth, particularly through greater resource augmentation and mobilization and higher degree of greater competition. Financial liberalization involves activities that eliminate constraints put on the financial and banking industries (Latib & Mohamad, 2023). These constraints in developing countries tends to result in high consumption, low savings and low investment, leading to distortion in the market and inhibiting economic growth (Adam, 2020).…”

Section: Financial Liberalizationmentioning

confidence: 99%

“…The traditional trade theory asserts that higher levels of trade bring about improvement in the economy (Farahane & Heshmati, 2020). A country's import and export activities provide beneficial outcomes in the form of expansion in production, support to the local business, expansion in job opportunities, and increase in national income which directly contribute to the economy (Latib & Mohamad, 2023). Prior studies (Keho, 2017; Oppong-Baah et al, 2022; Hungu, 2023) assert that trade openness positively impacts the financial liberalization and economic growth nexus.…”

Section: Trade Opennessmentioning

confidence: 99%

“…As a result of the general belief of several positive economic and financial benefits accruable from adoption of financial markets liberalization, many developing countries gradually adopted financial market liberalization (Sulaiman, et al, 2012). According to Nair (2004), the state-dominated development paradigm has shifted towards a more market-oriented development strategy in recent years.…”

Section: Introductionmentioning

confidence: 99%

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Financial liberalization and economic growth in the ECOWAS Sub-Region

Igbinovia

2023

JED

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Purpose — The study examines the nexus between financial liberalization and the economic growth of ECOWAS member states.Method — The longitudinal and latitudinal survey research design (expo-facto) is used in this study. Data are sourced from the World Bank and IMF Data Set for 2012-2020 and employed panel co-integration and system GMM for analyses.Result — We found that financial liberalization significantly impacts the economic growth of selected ECOWAS member countries. Similarly, the domestic economy's openness significantly impacts economic growth. While financial development exerts a positive impact, exchange rate and inflation negatively impact economic growth, the impact of interest rate is positive but insignificant.Contribution — The study provides cross-country evidence on the empirical nexus between financial liberalization and the economic growth from ECOWAS member states. To the best of authors’ knowledge, the study is one of the few studies on cross-country financial liberalization and the economic growth and used the panel data regression analysis. By this, the study covers a methodological gap, using a technique that can account for endogeneity and omitted variable problem.

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Section: Financial Liberalizationmentioning

confidence: 99%

Section: Trade Opennessmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Financial liberalization and economic growth in the ECOWAS Sub-Region

Igbinovia

2023

JED

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“…This phenomenon is increasingly apparent, as numerous economies have abandoned the practice of financial repression and instead adopted policies of financial liberalization. Sulaiman, Oke, and Azeez (2012) argued that in many developing nations, financial repression was the norm until the transition to financial liberalization occurred. Financial repression introduces regulations that lower interest rates, leading to lower savings and declining investment (McKinnon, 1973).…”

Section: Background To the Studymentioning

confidence: 99%

“…It is sufficient to say that a preponderance of these studies focused mainly on the impact of financial openness on economic growth. For country-specific studies, Sulaiman et al (2012) revealed that financial openness improved economic growth in Nigeria. This result was corroborated with a study by Anthony, Ogbuabor, and Anthony-Orji (2015) which observed that financial liberalization and private investment had positive and significant impact on economic growth in Nigeria.…”

Section: Empirical Literature Reviewmentioning

confidence: 99%

South Africa’s interest rate behaviour: Investigating the influence of the indicators of financial openness

Chile,

Ogomegbunam,

Ibekwe

et al. 2023

AJEER

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This study seeks to investigate the influence of financial openness variables on South Africa’s interest rate during the period between1980-2020. The study used both Augmented Dickey-Fuller (ADF) and Philip-Perron (PP) tests to determine the order of integration of the variables, while the autoregressive distributed lag (ARDL) bounds test was used to investigate both the short and long-run impact of the independent variables on the dependent variable. The findings of the study revealed that in the short-run both foreign direct investment (FDI) inflows and FDI outflows impacted the interest rate positively. However, portfolio investment, exchange rate and capital account openness did not have any significant impact on interest rate within the duration of this research. The long-run results revealed that FDI inflows had a positive and significant impact on interest rate. Also, while capital account openness had a significant and positive impact on the interest rate, FDI outflows, portfolio investment, and the exchange rate had no significant impact on interest rate. The study concludes that apart from portfolio investment which did not exert significant impact on interest rate, other financial openness indicators used in the study had a significant impact on South Africa’s domestic interest rate. The paper argues that, appropriate monetary policy measures targeted to lessen the monetary impact of excess capital inflows should be considered. Additionally, capital account liberalization policy should be encouraged, but it needs to be regulated if it places an excessive amount of liquidity pressure on the economy.

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Financial liberalization, remittances and economic growth in Nigeria (1990–2018)

Kudaisi

Osinubi

2021

JEAS

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PurposeInternational remittances are an important segment of external financial flows in Nigeria, currently superseding official development aid (ODA) in terms of volume, and foreign direct investment (FDI) in terms of stability. This study is motivated by the recent increase in remittance flows in Nigeria as the highest recipient in West Africa, and the fact that the growth impact of remittances is weak within the country. The financial liberalization index developed by Chinn and Ito (2006) is employed in this study to examine the role of financial liberalization in the remittances-growth nexus in Nigeria over the period 1990–2018.Design/methodology/approachTo address the possibility of endogeneity among the variables in the model, the study employs the generalized method of moments (GMM) as a technique of analysis.FindingsRemittances and financial liberalization are found to have negative significant impacts on economic growth. However, the effect of the interaction term of financial liberalization and remittances on economic growth is positive and significant. This suggests that the two variables act as complements in the enhancement of economic growth in Nigeria. The study thus concludes that financial liberalization is a strong transmission channel through which remittance inflows positively affect economic growth in Nigeria. The study also advocates for a well-developed financial sector in order to attract more growth-enhancing remittances into the country.Research limitations/implicationsThe implication of the research findings is that an unrestrained financial sector is necessary to encourage and optimize the benefits of remittance flows on economic growth in Nigeria.Originality/valuePrevious studies have considered the effects of financial development on the remittances-growth nexus in Nigeria. However, this study examines the role of financial liberalization in the nexus between remittances and economic growth in Nigeria by using the Chinn and Ito (2008) index of financial openness.

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Does Financial Liberalization Cause Economic Growth? A Meta-analysis Review

Cited by 4 publications

References 4 publications

Financial liberalization and economic growth in the ECOWAS Sub-Region

Financial liberalization and economic growth in the ECOWAS Sub-Region

South Africa’s interest rate behaviour: Investigating the influence of the indicators of financial openness

Financial liberalization, remittances and economic growth in Nigeria (1990–2018)

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