Financial liberalization in the emerging market economies: growth, volatility, or both?

When the post-World War II era began, the strategy of financial repression was endemic, leading to inefficient capital allocation and languishing financial intermediation. A group of developing economies adopted gradual financial liberalization seriously, and succeeded in becoming what became known as the emerging market economies – a rapidly globalizing group of economies. The final outcome was more rapid real growth than in the past and also compared to the non-globalizing group of economies. The flip side of this coin is that in the recent past liberalization has been squarely blamed for strong bouts of volatility in the emerging market economies.