Equity market liberalization in emerging markets / Commentary

One of the most important national policy decisions of the past 25 years has been the financial liberalization of equity markets across the world. Equity market liberalizations give foreign investors the opportunity to invest in domestic equity securities and domestic investors the right to transact...

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Bibliographic Details
Published in:Review - Federal Reserve Bank of St. Louis 2003-07, Vol.85 (4), p.53
Main Authors: Bekaert, Geert, Harvey, Campbell R, Lundblad, Christian T, Peter Blair Henry
Format: Article
Language:English
Subjects:
Capital markets
Developing countries
Economic policy
Emerging markets
Equity
Foreign exchange rates
Foreign investment
International finance
LDCs
Liberalization
Macroeconomics
Portfolio investments
Regulatory reform
Stock exchanges
Studies
Trade restrictions
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Summary:One of the most important national policy decisions of the past 25 years has been the financial liberalization of equity markets across the world. Equity market liberalizations give foreign investors the opportunity to invest in domestic equity securities and domestic investors the right to transact in foreign equity securities. Liberalizations must be dated to be studied, but pinpointing specific dates is difficult because countries have pursued varied liberalization strategies. This paper begins by analyzing the progress that has been made on dating liberalizations. It examines regulatory changes, the ability of investors to access the local market via proxies such as country funds, and the behavior of foreign portfolio holdings. If liberalization is effective, it leads to market integration, which has a fundamental impact on both the financial and real sectors of developing countries. The paper also summarizes some recent research on the impact of liberalization on the real sector.
ISSN:0014-9187
2163-4505