توسعه مالی و آزاد سازی مالی در آسیا: آستانه، نهادها و دنباله ای از آزاد سازی

This paper investigates whether financial openness leads to financial development after controlling for the level of legal/institutional development, and whether trade opening is a precondition for financial opening. The focus is on Asia. In a panel encompassing 87 less developed countries over the period 1980 to 2000, a higher level of financial openness is found to spur equity market development only if a threshold level of legal development has been attained, a condition which tends to prevail particularly among emerging market Asian countries. On the issue of sequencing, trade openness is found to be a prerequisite for successful inducement of financial development via capital account liberalization.

The Asian crisis of 1997–1998 confronted policy makers with the conundrum of financial globalization. While more open financial markets can contribute to economic development, it is the openness of financial markets that can make developing countries more vulnerable to financial disruptions (Kaminsky and Schmukler, 2001a and Kaminsky and Schmukler, 2001b; Schmukler, 2003).1 Despite the experience of the 1990s, East Asian policy makers do not appear to have abandoned the path of financial liberalization. Rather, as is best exemplified by the Chiang Mai Initiative, they have re-emphasized economic development through more integrated financial markets in the region. The progress in financial development has occurred against a backdrop of regional trade arrangements. As Pomfret (2005) documents, the Asian currency union also started being discussed in the region, signifying the importance of how to sequence liberalization policies.2 In sum, the debate is not whether to liberalize, but how to liberalize. This study attempts to inform that debate.

This paper examines the nexus between capital account liberalization and financial development with a focus on the Asian region. A casual examination of summary statistics shows that in recent decades this region has achieved high growth in equity-market development, as well as in the level of openness in cross-border financial transactions. This observation gives rise to questions concerning the ‘right way’ to implement liberalization. This paper examines two issues. First, what kinds of institutional settings have made financial liberalization successful in fostering equity-market development in Asia and other less developed countries? Second, is there empirical evidence to support the McKinnon hypothesis on the optimal sequence of liberalization, namely, that trade openness should precede financial openness?