Financial development, interest rate liberalization, and macroeconomic volatility

• Autores: Gongyan Yang, Hongzhong Liu
• Localización: Emerging Markets Finance & Trade, ISSN-e 1558-0938, Vol. 52, Nº. 4, 2016, págs. 991-1001
• Idioma: inglés
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• Resumen

  • This article examines the relationship between financial development, interest rate liberalization, and macroeconomic volatility in fifty-six emerging and developed economies over the period 1980–2009. We find that financial development plays a significant role in dampening the volatility of macroeconomic growth rate, but up to a limit. The more the interest rate is liberalized, the more likely that financial development can stabilize the economy. Particularly, interest rate liberalization has a more positive influence on emerging and developing countries. Financial development and interest rate liberalization can also alleviate the influence of external shocks. They mutually enhance their functions as economic stabilizers