Home-bias Politics, Financial Deregulation and Economic Growth: A Causal Relationship

He, Qichun (2011): Home-bias Politics, Financial Deregulation and Economic Growth: A Causal Relationship.

Abstract

We re-examine the finance-growth nexus using the Chinese financial deregulation experience during the reform period 1981-1998. We use lagged home-bias political variables as instruments for financial deregulation. Dealing with weak instruments by LIML (limited-information maximum likelihood) estimation, we find that financial deregulation has a significant causal effect on economic growth. The result holds up when we control for conditional convergence, other growth determinants, and time and province effects.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial Deregulation; Home-bias Politics; Causality; Growth
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O21 - Planning Models ; Planning Policy; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General

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