|
Geert Bekaert, Campbell R. Harvey, Christian Lundblad
NBER Working Paper No. 10560*
Issued in June 2004
NBER Program(s): AP
EFG
ITI
---- Abstract -----
We examine the effects of both equity market liberalization and capital account openness on real consumption growth variability. We show that financial liberalization is mostly associated with lower consumption growth volatility. Our results are robust, surviving controls for business-cycle effects, economic and financial development, the quality of institutions, and other variables. Countries that have more open capital accounts experience a greater reduction in consumption growth volatility after equity market openings. The results hold for both total and idiosyncratic consumption growth volatility. We also find that financial liberalizations are associated with declines in the ratio of consumption growth volatility to GDP growth volatility, suggesting improved risk sharing. Our results are weaker for liberalizing emerging markets but we never observe an increase in real volatility. Moreover, we demonstrate significant differences in the volatility response depending on the size of the banking and government sectors and certain institutional factors.
*Published: Bekaert, Geert, Campbell R. Harvey and Christian Lundblad. "Growth Volatility And Financial Liberalization," Journal of International Money and Finance, 2006, v25(3,Apr), 379-403.
Would you like an annual subscription to NBER Working Papers? Click
here for more information.
You may purchase this paper on-line in .pdf format
from SSRN.com ($5) for electronic delivery.
Information for subscribers and others expecting no-cost downloads
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
| 
