FINANCIAL OPENNESS FOR SMALL OPEN ECONOMY
Keywords:
Financial openness, Output growth, Economic growth, ManufacturingAbstract
The openness declared in Malaysia aims to strengthen the economic interlinkages with other economies and enhancing the role of the liberalization itself as a key enabler and mechanism of economic growth.The main concern of this study is to examine the correlation between financial openness towards economy and the total output growth. Primary attention has been given, for not just focusing on country level but also going in depth into manufacturing industry level to look at this relationship based on Malaysia experience. By using de facto financial openness, the result shows that financial openness is significant for both in country and industry level and support that the volume of country’s assets and liabilities did impact on economy and output growth. However, in Granger causality test the significant level only shows on a country level.
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References
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Rodrik, Dani, 1998, ‘‘Who Needs Capital-Account Convertibility?’’ in Essays in International Finance, Vol. 207 (Princeton, New Jersey, Princeton University).
Romer, P. (1990).―Endogenous Technological Change.The Journal of Political Economy 98, no. 5: S71–S102.
Romer, P. (1994). ―The Origins of Endogenous Growth.‖ Journal of Economic Perspectives 8, no. 1: 3–22.
Sala-i-Martin, X., G. Doppelhofer, and R. Miller. (2004). ―Determinants of Long-term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach. American Economic Review 94, no. 4: 813–835.
Sinha, C. and Pradhan, N. C. (2008), ‘Regional Financial Integration in Asia: Present and Future’, BIS Papers No. 42, October.
Stiglitz, Joseph, (2000), ‘‘Capital Market Liberalization, Economic Growth, and Instability,’’ World Development, Vol. 28, No. 6, pp. 1075–86.
Stojkov.A and Zalduendo, J. (2011).Heterogeneity and Investment Opportunities in Emerging Europe. Policy Research Working Paper 5837.The World Bank Europe and Central Asian Region.
Solow, R. (1956). ―A Contribution to the Theory of Economic Growth.Quarterly Journal of Economics 70, no. 1: 65–94
Summers, Lawrence H., (2000), “International Financial Crises: Causes, Prevention, and Cures,” American Economic Review, Vol. 90, No. 2, pp.1–16.
Thomas White International Ltd. (2010). Capturing Value Worldwide, Country profile: Malaysia. Bangalore: Thomas, W.
Arbeláez, M. A, and Echavarría, J.J. (2002).Credit, Financial Liberalization and Manufacturing Investment in Colombia.Inter-American development Bank. Washington, DC 20577
Baltagi, B. H., Demetriades, P. O. and Law, S. H. (2009).“Financial development and openness: evidence from panel data”, Journal of Development Economics, 89, 285-296.
Bank Negara Malaysia. (1970-2004). Annual Report 2006. Kuala Lumpur: Bank Negara Malaysia.
Bekaert, G., Harvey, C. R., &Lundblad, C. (2005). Does financial liberalization spur growth?. Journal of Financial Economics, 77(1), 3–56.
Bekaert, G., Harvey, C. R., &Lundblad, C. (2010).Financial openness and Productivity. Journal of World development, 39(1), 1-19
Bhagwati, Jagdish, (1998), ‘The Capital Myth. The Difference between Trade in Widgets and Dollars,” Foreign Affairs, Vol. 7, No. 3, pp. 7–12.
Cakici, S. M. (2009). Financial Integration in a Small Open Economy.Journal of Economic University of Bonn.
Prasad, Kenneth Rogoff, and Shang-Jin Wei Wei, and M. AyhanKose. (2007). Globalization and Poverty, ed. by Ann Harrison (Chicago, University of Chicago Press), pp. 510–16.
Department of Statistic. (1970-2004). Economic Report . Kuala Lumpur, Malaysia: Treasury Department of Malaysia.
DurmuşÖzdemirand Can Erbil (2008). (2008). Does Financial Liberalization Trigger Long-Run Economic Growth? Evidence from Turkey and Other Recent EU Members. Istanbul Bilgi University, Department of Economics
Eichengreen, Barry, RachitaGullapalli and UgoPanizza (2009), “Capital Account Liberalization, Financial Development and Industry Growth: A Synthetic View,” UNCTAD Polis Working Paper no.144 (June).
Fischer, Stanley, (1998), “Capital Account Liberalization and the Role of the IMF,” in “Should the IMF Pursue Capital-Account Convertibility?” Essays in International Finance,Department of Economics, Princeton University, Vol. 207, pp. 1–10.
Guiso, Luigi, TullioJappelli, Mario Padula and Marco Pagano. (2004). “Financial Market Integration and Economic Growth in the EU,” Economic Policy 19(40), 523-77.
Gupta, N., & Yuan, K. (2009). On the growth effect of stock market liberalizations. Review of Financial Studies, 22(11), 4715–4752.
Karolyi, George Andrew, and Rene´ M. Stulz. (2003).Are Assets Priced Locally or Globally?. Handbook of the Economics of Finance, ed. by Milton Harris George and Rene´ M. Stulz (Elsevier, North-Holland).
Khoon, G. S. (2007). Financial Liberalization and Openness in Malaysia.Journal of Dissertation, 1(2).
Kose, M. Ayhan, Eswar Prasad, Kenneth Rogoff and Shang-Jin Wei, (2008), “FinancialGlobalization: A Reappraisal,” IMF Staff Papers, forthcoming.
Kose, M., Prasad, E., &Terrones, M. (2009). Does openness to international flows raise productivity growth? Journal of International Money and Finance, 28(4), 554–580.
Lane, P. R. and Milesi-Ferretti, G. M. (2007). “The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004,” IMF Working Paper 06/69.
Lee, C. (2000). The Impact of Globalization on Liberalization on the Financial service Sector. University of Malaya.
Levchenko, Andrei A., RomainRanciere, and Matthias Thoenig, (2009), “Growth and Risk at the Industry Level: The Real Effects of Financial Liberalization,” Journal of DevelopmentEconomics, forthcoming.
Loayza, Norman V., Chang. R, and Kaltani, L. (2009) “Openness Can Be Good for Growth: The Role of Policy Complementarities.” Journal of Development Economics 90(1):33-49.
Lucas, R. 1990. ―Why Doesn’t Capital Flow from Rich to Poor Countries? American Economic Review 80, no. 2: 92–96.
Pasricha, G. (2008), Financial Integration in Emerging Market Economies, Department of Economics, University of California at Santa Cruz Working Paper No. 641.
Popov, A. (2011). Financial Liberalization, Growth and Risk. European Central Bank.
Prasad, E., Rogoff, K., Wei, S., &Kose, M. (2009). Financial globalization: A reappraisal. IMF Staff Papers, 56, 8–62.
Prasad, Eswar S., Kenneth Rogoff, Shang-Jin Wei, and M. AyhanKose, (2003), Effects of Financial Globalization on Developing Countries: Some EmpiricalEvidence, IMF Occasional Paper 220 (Washington, International Monetary Fund).
Prasad, Eswar, and RaghuramRajan, (2008), “A Pragmatic Approach to Capital Account Liberalization,” Journal of Economic Perspectives, forthcoming.
Quinn, D., &Inclan, C. (1997). The origins of financial openness: A study of current and capital account liberalization. American Journal of Political Science, 41(3), 771–813.
Quinn, D., & Toyoda, A. M. (2008). Does capital account liberalization lead to economic growth? An empirical investigation. Review of Financial Studies, 21(3), 1403–1449.
Rajan, R. G., &Zingales, L. (1998).Financial dependence and growth. American Economic Review, 88(3), 559–586.
Rajan, Raghuram, and Luigi Zingales, (1998), “Financial Dependence and Growth,” American Economic Review, Vol. 88, No. 3 (June), pp. 559–86.
Rodrik, Dani, 1998, ‘‘Who Needs Capital-Account Convertibility?’’ in Essays in International Finance, Vol. 207 (Princeton, New Jersey, Princeton University).
Romer, P. (1990).―Endogenous Technological Change.The Journal of Political Economy 98, no. 5: S71–S102.
Romer, P. (1994). ―The Origins of Endogenous Growth.‖ Journal of Economic Perspectives 8, no. 1: 3–22.
Sala-i-Martin, X., G. Doppelhofer, and R. Miller. (2004). ―Determinants of Long-term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach. American Economic Review 94, no. 4: 813–835.
Sinha, C. and Pradhan, N. C. (2008), ‘Regional Financial Integration in Asia: Present and Future’, BIS Papers No. 42, October.
Stiglitz, Joseph, (2000), ‘‘Capital Market Liberalization, Economic Growth, and Instability,’’ World Development, Vol. 28, No. 6, pp. 1075–86.
Stojkov.A and Zalduendo, J. (2011).Heterogeneity and Investment Opportunities in Emerging Europe. Policy Research Working Paper 5837.The World Bank Europe and Central Asian Region.
Solow, R. (1956). ―A Contribution to the Theory of Economic Growth.Quarterly Journal of Economics 70, no. 1: 65–94
Summers, Lawrence H., (2000), “International Financial Crises: Causes, Prevention, and Cures,” American Economic Review, Vol. 90, No. 2, pp.1–16.
Thomas White International Ltd. (2010). Capturing Value Worldwide, Country profile: Malaysia. Bangalore: Thomas, W.
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Published
2019-03-05
How to Cite
Ramdhan, N. A., & Bee Hoong, T. (2019). FINANCIAL OPENNESS FOR SMALL OPEN ECONOMY. Journal of Contemporary Issues and Thought, 2, 103–114. Retrieved from https://ejournal.upsi.edu.my/index.php/JCIT/article/view/935
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