Financial Openness and Economic Growth A Review

Abstract

In the age of globalization, changes in how economies grow have made people think about how open financial systems and their development affect a country's economy. Economic growth means a country can make more things over time because of new technology and changes in how things are done. The connection between economic growth and financial openness has sparked significant debate in the literature on openness and growth. Empirical research frequently indicates a clear link between proxies of financial openness and growth, yet there is ongoing debate regarding the interpretation of these findings. This study addresses four primary areas of contention: the definition of financial openness, the choice and assessment of indicators for financial openness, the correlation between financial openness and economic growth, and the potential threshold effect of financial openness on its contribution to economic growth.