Date of Degree


Document Type


Degree Name





Peter C. Chow

Subject Categories



Financial Openness, Inward FDI, Outward FDI, Portfolio Assets, Portfolio Liabilities


In recent decades, financial liberalization has been one of the most important strategies for Asian countries to promote growth. However, debate emerges following several financial crises on whether liberalizing financial markets and allowing for free access to international capital markets, would benefit or impede economic development. The objective of this study is to examine the impact of financial openness on selected seventeen Asian economies and answer the three questions: 1. Is there any linkage between financial openness and economic growth for these seventeen Asian countries? 2. Does any of the financial openness pose positive or negative effects? 3. If no direct impact revealed, can financial openness still have growth effect under certain fundamental or institutional conditions? Our main findings are as follows:

1. By employing both de jure and de facto indicators of financial openness, our empirical results indicate that the de facto indicators are associated with growth of Asian economies but de jure indicator does not show statistically significant impact on growth across three methodologies.

2. Furthermore, these growth effects vary among the de facto indicators. According to our empirical results, out of the four de facto financial openness measurements, only one of them, foreign direct investment inflows, influences growth positively whereas three other measures, including foreign direct investment outflows, portfolio investment inflows and outflows exert negative impact on growth.

3. In terms of the view that the growth effect of the financial openness depends on macroeconomic foundations or institutional conditions of an economy, my findings show that financial openness could have positive growth effects when a country has a highly open trade market and improved terms of trade.

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