tailieunhanh - The and Social EffEconomic ects of Financial Liberalization: A Primer for Developing Countries

This paper considers the main elements of the standard pattern of fi nancial liberalization that has become widely prevalent in developing countries. The theoretical arguments in favour of such liberalization are considered and critiqued, and the political economy of such measures is discussed. The problems for developing countries, with respect to fi nancial fragility and the greater propensity to crisis, as well as the negative defl ationary and developmental effects, are discussed. It is concluded that there is a strong case for developing countries to ensure that their own fi nancial systems are adequately regulated with. | Economic DESA Working Paper No. 4 ST ESA 2005 DWP 4 October 2005 Social Affairs The Economic and Social Effects of Financial Liberalization A Primer for Developing Countries Jayati Ghosh Abstract This paper considers the main elements of the standard pattern of financial liberalization that has become widely prevalent in developing countries. The theoretical arguments in favour of such liberalization are considered and critiqued and the political economy of such measures is discussed. The problems for developing countries with respect to financial fragility and the greater propensity to crisis as well as the negative deflationary and developmental effects are discussed. It is concluded that there is a strong case for developing countries to ensure that their own financial systems are adequately regulated with respect to their own specific requirements. JEL Classification F41 Open Economy Macroeconomics F43 Economic Growth of Open Economies G15 International Financial Markets . Keywords financial liberalization development banking financial fragility financial crisis deflation. Jayati Ghosh is Professor and Chairperson of the Centre for Economic Studies and Planning School of Social Sciences Jawaharlal Nehru University New Delhi India. She has published widely in the areas of development employment generation international economic issues and gender and macroeconomics. She is currently the honorary Executive Secretary of International Development Economics Associates IDEAs a South-based international network promoting heterodox development economics. Contents The Economic and Social Effects of Financial Liberalization A Primer for Developing Countries. 1 The nature of financial liberalization. 2 The theoretical arguments for financial liberalization. 3 The political economy of financial liberalization. 5 The negative effects of financial liberalization. 9 Financial fragility and the propensity to crisis. 9 Deflation and developmental effects. 12 Alternative .