Does Liberalization Spur Growth?

We show that ¯nancial liberalizations positively impact the growth prospects of a large sample of economies. Our results show that, on average, liberalizations lead to a one percent increase in annual real economic growth over a ¯ve-year period. Our research also explores the channels whereby liberalizations impact economic prospects, in particular, the cost of equity capital, the e±ciency of equity markets, and the capital investment process. Finally, we explore the country-speci¯c characteristics that lead to liberalizations being more or less e®ective than the average