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Re-examining the financial development-openness nexus: nonparametric evidence for developing countries
Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE). University of Ghana Business School.
2017 (English)In: Journal of Applied Economics, ISSN 1514-0326, E-ISSN 1667-6726, Vol. 20, no 2, p. 373-394Article in journal (Refereed) Published
Abstract [en]

This paper re-examines the nexus between financial development and openness in developing countries. Specifically, we test whether both financial and trade openness explain financial development and its variations across 44 developing economies. Questioning the functional specifications in previous studies, we propose a fully nonparametric modelling approach to validate the simultaneous openness hypothesis. Our findings from the parametric approach suggest that both openness dimensions positively impact financial development, providing a loose support for the simultaneous openness hypothesis. The results based on the nonparametric approach suggest a negative effect of closed economies (economies with relatively closed trade and capital accounts) on financial development, supporting the strong version of the simultaneous openness hypothesis. Correct model specification test results support the nonparametric model relative to the parametric model as appropriate for the sampled data. Our conclusion is therefore based on the nonparametric finding, which supports the simultaneous openness hypothesis for the selected developing countries.

Place, publisher, year, edition, pages
Universidad del CEMA , 2017. Vol. 20, no 2, p. 373-394
Keywords [en]
financial development, financial openness, trade openness, nonparametric analysis, developing untries
National Category
Economics
Identifiers
URN: urn:nbn:se:umu:diva-142461DOI: 10.1016/S1514-0326(17)30017-XISI: 000415657800008OAI: oai:DiVA.org:umu-142461DiVA, id: diva2:1162479
Available from: 2017-12-04 Created: 2017-12-04 Last updated: 2018-06-09Bibliographically approved

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Karimu, Amin

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