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      Does Financial Liberalisation Improve Access to Investment Finance in Developing Countries?

      Journal of Globalization and Development
      Walter de Gruyter GmbH

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          Abstract

          This paper considers the effect of financial liberalisation on access to investment finance using firm level data covering 48 developing and transition countries. An index is presented which measures financial market liberalisation along the following policy dimensions: directed lending, credit controls and reserve requirements, state control of banking, openness of international financial flows, banking market entry, prudential regulation and supervision and securities market development. Categorising firms as financially constrained across four measures, the results indicate that financial liberalisation is robustly associated with a reduction in the probability of being credit constrained, with the effect strongest for young, domestic private small and medium sized enterprises. For Sub-Saharan Africa, the results indicate that financial liberalisation actually increases financing constraints for firms. This may help explain the stylised fact that despite a commitment to financial reform, the predicted growth benefits have not been realised in this region.

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          Most cited references29

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          Finance and Growth: Schumpeter Might Be Right

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            Financial Development and Financing Constraints: International Evidence from the Structural Investment Model

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              Financing patterns around the world: Are small firms different?☆

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                Author and article information

                Journal
                Journal of Globalization and Development
                Walter de Gruyter GmbH
                1948-1837
                2194-6353
                January 1 2014
                January 1 2014
                : 5
                : 1
                Article
                10.1515/jgd-2013-0028
                587e340f-dfbc-4704-b1ad-8f086185e8ca
                © 2014
                History

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