Does financial liberalization spur economic growth? A meta-analysis

Abstract

Based on a survey of 54 published articles, we undertake a meta-analysis of 906 estimates of the effects of financial liberalization on economic growth. We conclude that the literature contains statistically significant evidence of a positive effect of financial liberalization on economic growth, and, in some cases, these effects can be considered as economically meaningful. Thus, some types of financial liberalization are effective policy tools for increasing an economy's rate of growth even if financial liberalization increases the volatility of the financial sector. We also identify the presence of publication-selection bias in the literature and, after adjusting for this bias, we conclude that stock market liberalization and comprehensive financial market liberalization are the most effective forms of financial sector liberalization for stimulating economic growth. There is conflicting evidence on whether other types of financial liberalization have similar effects.