Emerging Equity Markets and Economic Development

We provide an analysis of real economic growth prospects in emerging markets after financial liberalizations. We identify the financial liberalization dates and examine the influence of liberalizations while controlling for a number of other macroeconomic and financial variables. Our work also introduces an econometric methodology that allows us to use extensive time-series as well as cross-sectional information for our tests. We find across a number of different specifications that financial liberalizations are associated with significant increases in real economic growth. The effect is larger for countries with high education levels.