Triptych of Liberalization, Globalization and Financialization: Implications for Economic Growth, Development and Stability in D
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Triptych of liberalization, globalization and financialization : implications for economic growth, development and stability in developing and emerging economies Saadia Irshad To cite this version: Saadia Irshad. Triptych of liberalization, globalization and financialization : implications for economic growth, development and stability in developing and emerging economies. Economics and Finance. Université de Grenoble, 2013. English. NNT : 2013GRENE006. tel-00971812 HAL Id: tel-00971812 https://tel.archives-ouvertes.fr/tel-00971812 Submitted on 3 Apr 2014 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. THÈSE Pour obtenir le grade de DOCTEUR DE L’UNIVERSITÉ DE GRENOBLE Spécialité : Sciences Economiques Arrêté ministériel : 7 août 2006 Présentée par Saadia IRSHAD Thèse dirigée par Faruk ÜLGEN préparée au sein du Centre de Recherche en Économie de Grenoble (CREG) dans l'École Doctorale de Sciences Économiques Triptyque de libéralisation, mondialisation et financiarisation. Implications pour la croissance économique, le développement et la stabilité dans les économies en développement et émergentes Thèse soutenue publiquement le 11 Avril 2013 devant le jury composé de: M. Jean-Luc BAILLY Maître de Conférences-HDR à l’Université de Bourgogne Dijon (Rapporteur) M. Jean CARTELIER Professeur à l’Université Paris Ouest Nanterre La Défense (Rapporteur) M. Ramon TORTAJADA Professeur à l’Université Pierre Mendès France (Président du Jury) M. Faruk ÜLGEN Maître de Conférences-Habilité à Diriger des Recherches à l’Université Pierre Mendès France (Directeur de thèse) Université Joseph Fourier / Université Pierre Mendès France / Université Stendhal / Université de Savoie / Grenoble INP 2 ACKNOWLEDGEMENT First and foremost, I owe my deepest and sincere gratitude to Higher Education Commission (HEC) of Government of Pakistan for providing me complete financial support in order to pursue Masters leading to PhD in France. Despite of meager development resources that a country like Pakistan has, HEC remained committed in their pursuit of capacity building for research and development. I would again thank HEC who has always been very helpful and supportive throughout my research years. I would like to express thanks to my supervisor, Dr. Faruk ÜLGEN, who let me experience various phases of research and patiently corrected my writings. I would never have been able to complete my PhD dissertation without his invaluable guidance and unsurpassed knowledge, for which I am extremely grateful. I am also very obliged to the Ecole Doctorale of the Université Pierre Mendès France- Grenoble 2 as well as my lab (Centre de Recherche en Economie de Grenoble - CREG) for all of their academic, technical and financial support. I am especially thankful to Claire BARRAUD, a doctorate colleague in CREG, who took time from her busy schedule to translate the extended abstract of this dissertation in French on a very short notice. Last but not the least, I would like to express my heartiest gratitude to my parents to whom I owe all of my past, present and future accomplishments. Université Joseph Fourier / Université Pierre Mendès France / Université Stendhal / Université de Savoie / Grenoble INP 3 TABLE OF CONTENTS TABLE OF CONTENTS ................................................................................................................................ 3 LIST OF ACRONYMS ................................................................................................................................... 7 LIST OF ANNEXURES ................................................................................................................................. 8 ABSTRACT .................................................................................................................................................... 9 RÉSUMÉ ...................................................................................................................................................... 10 GENERAL INTRODUCTION ..................................................................................................................... 11 CHAPTER 1. FINANCIAL AND ECONOMIC DEVELOPMENT – PERSPECTIVE OF FINANCIAL REPRESSION .............................................................................................................................................. 20 INTRODUCTION ........................................................................................................................................ 20 SECTION 1. FINANCE, GROWTH AND DEVELOPMENT - EVOLUTION OF KEY IDEAS ..................................... 22 1.1 Schumpeterian Theory .......................................................................................................................... 22 1.2 Neo-classical and Endogenous Approaches of Growth ....................................................................... 24 1.2.1 Savings ............................................................................................................................................................. 25 1.2.2 Financial Intermediation ................................................................................................................................ 26 1.3 Review of Empirical Research .............................................................................................................. 27 SECTION 2. DIRECTION OF CAUSALITY IN FINANCE-GROWTH NEXUS ......................................................... 28 2.1 Demand-following Approach versus Supply-leading Approach .......................................................... 29 2.2 Review of Empirical Research .............................................................................................................. 32 SECTION 3. NATURE OF “FINANCIAL STRUCTURE” FOR GROWTH AND DEVELOPMENT .............................. 33 3.1 Intermediary-based or Bank-based View .............................................................................................. 34 3.2 Market-based View ................................................................................................................................ 36 3.3 Financial Services View ........................................................................................................................ 38 3.4 Legal View ............................................................................................................................................. 40 3.5 Review of Empirical Research .............................................................................................................. 42 SECTION 4. FINANCIAL SERVICES ................................................................................................................... 43 4.1 Produce information about potential investments ................................................................................ 44 4.2 Monitor investments and corporate governance .................................................................................. 45 4.3 Facilitate the risk management ............................................................................................................. 46 4.4 Mobilize and pool savings ..................................................................................................................... 49 4.5 Ease the exchange of goods and services ............................................................................................. 50 SECTION 5. FINANCIAL SECTOR DEVELOPMENT AND GROWTH – REVIEW OF EMPIRICAL RESEARCH ...... 51 SECTION 6. MONEY VIEW OF ECONOMY ........................................................................................................ 55 6.1 KEYNES’S GENERAL THEORY ................................................................................................................... 57 6.1.1 Policy Formulations ........................................................................................................................................ 58 6.1.2 Post-Keynesian Approach .............................................................................................................................. 59 6.2 Tobin’s Portfolio Model and Inflation Tax .......................................................................................... 61 6.2.1 Policy Formulations ........................................................................................................................................ 62 SECTION 7. KEY IDEAS OF REPRESSION – DEVELOPING COUNTRY’S PERSPECTIVE .................................... 64 7.1 Fragmentation in the Economy ............................................................................................................ 65 7.2 The Intervention Syndrome ................................................................................................................... 66 7.2.1 Tariff Protection for Infant Industries .......................................................................................................... 66 7.2.2 Import Licenses and