Q2. What are the components of GDP that are available for all samples?
Economic growth rates, the components of GDP (consumption, government, investment and trade), and the official financial liberalization indicator are available for all samples.
Q3. What is the effect of financial liberalization on economic growth?
Financial liberalization may affect economic growth by reducing capital market imperfections, which might in turn reduce the external finance premium.
Q4. What is the econometric method used to determine economic growth?
Since financial liberalization has a temporal dimension, their econometric methodology uses a General Method of Moments estimator (Hansen (1982)) on panel data with overlapping observations.
Q5. What are the main determinants of long-run growth?
Sachs and Warner (1995a) emphasize that policy choices, such as respect for private property rights and open international trade, are particularly important determinants of long-run growth prospects.
Q6. How do the authors deal with the moving average component in the residuals?
To maximize the time-series content in their regression, the authors use overlapping data and deal with the resulting moving average component in the residuals by adjusting the standard errors as a cross-sectional extension to Newey and West (1987).
Q7. What is the main motivation of the panel technique?
Islam’s (1995) main motivation in using panel techniques is the fact that allowing for fixed effects will mitigate the omitted variable problem that plagues the usual regression setup.
Q8. What is the common reason for using k = 10?
Since their sample is relatively short, starting only in 1980, and many liberalizations only occurred in the 1990s, the use of k = 10, which is typical in the literature, is problematic.
Q9. What is the main reason the authors use k = 5 for of their tables?
This motivates us to use k = 5 for most of their tables, but the authors ran the data through for k = 3, k = 7 and k = 10 as well, finding the main results to be resilient to the choice of k.
Q10. What are the main variables that the authors will examine?
the authors will examine the relationship between liberalization and growth after controling for a range of demographic, economic and financial conditions.
Q11. What is the effect of liberalization on income levels across countries?
the strength of the liberalization effect may be due to forces outside the control of the government, such as the diversification potential of the local equity market for world investors.
Q12. What factors help distinguish the magnitude of the liberalization effect across countries?
The authors investigate whether the presence of schooling, a small government sector, the legal system [see La Porta et al. (1997, 1998)], and democratic institutions help differentiate the magnitude of the liberalization effect across countries.
Q13. How can the authors accommodate heteroskedasticity across countries?
In their panel methods, the authors can accommodate heteroskedasticity both across countries and across time and correlation between country residuals by choosing the appropriate weighting matrix W .
Q14. What are the largest sample of countries?
Samples The authorand II, their largest, include 95 and 75 countries, respectively, and employ primarily macroeconomic and demographic data.