UPM Institutional Repository

Financial development and openness : evidence from panel data.


Baltagi, Badi H. and Demetriades, Panicos O. and Law, Siong Hook (2009) Financial development and openness : evidence from panel data. Journal of Development Economics, 89 (2). pp. 285-296. ISSN 0304-3878


This paper addresses the empirical question of whether trade and financial openness can help explain the recent pace in financial development, as well as its variation across countries in recent years. Utilising annual data from developing and industrialised countries and dynamic panel estimation techniques, we provide evidence which suggests that both types of openness are statistically significant determinants of banking sector development. Our findings reveal that the marginal effects of trade (financial) openness are negatively related to the degree of financial (trade) openness, indicating that relatively closed economies stand to benefit most from opening up their trade and/or capital accounts. Although these economies may be able to accomplish more by taking steps to open both their trade and capital accounts, opening up one without the other could still generate gains in terms of banking sector development. Thus, our findings provide only partial support to the well known Rajan and Zingales hypothesis, which stipulates that both types of openness are necessary for financial development to take place.

Download File

PDF (Abstract)
Financial development and openness.pdf

Download (85kB) | Preview

Additional Metadata

Item Type: Article
Subject: Finance - Malaysia.
Subject: Economic development - Malaysia.
Divisions: Faculty of Economics and Management
Publisher: Elsevier
Keywords: Financial development; Trade openness; Financial openness; Financial liberalization; Dynamic panel data analysis.
Depositing User: Emelda Mohd Hamid
Date Deposited: 03 Jun 2013 06:49
Last Modified: 02 Sep 2015 07:05
URI: http://psasir.upm.edu.my/id/eprint/17706
Statistic Details: View Download Statistic

Actions (login required)

View Item View Item