Appendix 2.

Summaries of empirical studies

Table 2.1. A summary of the characteristics of the previous studies for the impacts of openness on financial development
No. Author(s) Countries Time periods Methodologies Dependent variables Independent variables Controlled variables Findings

1 Rajan and 24 countries 1913–1999 2SLS Number of companies Cross-border capital flows Tariffs TradeOpen  FD (+)
Zingales listed/GDP (or population), (Taylor, 1998); total
(2003) stock market trade/GDP FO* TradeOpen ≠
capitalization/GDP, FD
deposits/GDP, equity
issues/gross fixed capital
formation

2 Baltagi et al. 42 countries 1980–2003 DGMM (i) Banking development (i) Financial openness: the Economic institutions, TradeOpen  FD (+)
(2007) indicators: liquid volume of a country’s per capita income
liabilities/GDP, private foreign assets and liabilities FO  FD (+)
credit/GDP, domestic over GDP (Lane and Milesi-
credit/GDP Feretti, 2007); six different FO*TradeOpen 
aspects of liberalization FD (+)
(ii) Capital market comprising credit controls,
development indicator: interest rate controls, entry
number of companies barriers, regulations,
listed/GDP privatization, and
international transactions
(Abiad and Mody, 2005).

(ii) Trade openness: Total

trade/GDP.

3 Baltagi et al. 42 countries 1980–2003 DGMM (i) Banking development: (i) Financial openness: the Institutional quality, TradeOpen  FD (+)
(2009) Private credit/GDP volume of a country’s real GDP per capita,
foreign assets and liabilities neighbour's average FO
 (ii) Capital market over GDP (Lane and Milesi- trade openness (close)*TradeOpen
development: stock market Feretti, 2007); six different  FD (−)
capitalization/GDP aspects of liberalization
comprising credit controls,
interest rate controls, entry
barriers, regulations,
privatization, and
international transactions
(Chinn and Ito, 2006)

4 Karimu and 44 developing 1975–2010 FE, LSDVC, Private credit/GDP (i) Financial openness: The Real GDP per capita, TradeOpen  FD (+)
Marbuah countries GMM, LLK volume of external assets institutional quality
(2017) and liabilities and KAOPEN FO  FD (+)

(ii) Trade openness: Total

trade (exports and
imports)/GDP

5 Ito (2006) 87 less 1980–2000 OLS, FE, Private credit, stock market (i) Financial openness: Per capita income, FO  FD (+/−)
developed 2SLS capitalization, total value of KAOPEN inflation rate, and trade
countries stocks traded, stock market openness (total
turnover ratio (ii) Legal/institutional trade/GDP)
variables

6 Chinn and Ito 105 countries 1970–1997 OLS, FE, Liquid liabilities/GDP, (i) Financial openness: Per capita income, FO  FD (+)
(2002) 2SLS private credit/GDP, stock KAOPEN inflation rate, and trade
market capitalization/GDP, openness (total
total value of stocks (ii) Legal/institutional trade/GDP), regional
 traded/GDP, the stock market variables and time dummies.
turnover ratio, and equity
issues/GDP

7 Chinn and Ito 108 countries 1980–2000 OLS, FE, Private credit/GDP, stock (i) Financial openness: Per capita income, FO  FD (+/−)
(2006) 2SLS market capitalization, total KAOPEN inflation rate, and trade
value of stocks traded, stock openness (total
market turnover ratio (ii) Legal/institutional trade/GDP), regional
variables and time dummies

8 Law and 43 developing 1980 – 2001 DGMM, PMG (i) Banking sector (i) Financial openness: Real GDP per capita, TradeOpen  FD (+)
Demetriades countries development: liquid KAOPEN institutional
(2006) liabilities/GDP, private environment FO  FD (+)
credit/GDP, and domestic (ii) Trade openness: Total
credit/GDP trade/GDP FO*TradeOpen 
FD (+).
(ii) Capital market
development: stock market
capitalization/GDP, total
share traded/GDP and
number of companies
listed/total population

9 David et al. 34 sub-Saharan 1970–2009 PMG, CCE, Liquid liabilities/GDP, (i) Financial openness: GDP per capita, TradeOpen  FD (+)
(2014) Africa AMG, private credit/GDP (by KAOPEN inflation, institutional
economies SGMM, deposit-taking banks), private quality, financial
DGMM credit/GDP (financial (ii) Trade openness: Total reforms index,
institutions), private trade/GDP population density,
credit/GDP, bank terms of trade, quality
deposits/GDP, financial of bureaucracy
system deposits/GDP indicator
10 Kim et al. 88 countries 1960–2005 PMG The value of credits by Total trade/GDP Real GDP per capita; TradeOpen  FD (+)
(2010a) financial intermediaries to the government [long-run]
private sector/GDP; the sum expenditure/GDP, the
of currency and demand and inflation rate TradeOpen  FD (−)
interest-bearing liabilities of [short-run]
banks and non-bank financial
intermediaries/GDP; the
domestic assets of deposit
money bank/GDP

11 Trabelsi and 90 countries 1980–2000 DGMM Private credit/GDP, the KAOPEN Total trade/GDP, initial FO  FD (+/−)
Cherif (2017) (developed and money stock M2/GDP financial development,
developing the inflation rate
countries)

12 Beck (2002) 65 countries 1966 and OLS, IV Private credit/GDP A share of manufactured The black-market TradeOpen  FD (+)
1995 exports in GDP premium, the initial
level of real per capita
GDP, the growth rate
of terms of trade and
total population

13 Svaleryd and 80 countries 1960–1994 OLS, RE Sachs and Warner (1995) Liquid liabilities/GDP, Index of openness to TradeOpen  FD
Vlachos index, total trade/GDP credit issued to private international financial (+/−)
(2002) enterprises/GDP, the value markets
of listed companies on the
stock market/GDP (stock
market capitalization)

14 Svaleryd and 32 1989–1991 OLS, FEM Industrial specialization The stock market Legal variables, human TradeOpen  FD
Vlachos manufacturing capitalization/GDP, liquid capital, physical
 (2005) industries in 20 index liabilities/GDP, the value of capital, natural (+/−)
countries in listed shares/GDP, total resources, general
OECD value of stock market country factors
trade/GDP

15 Kim et al. 87 countries 1960–2005 PMG, MG The average of private credit, Total trade/GDP The initial real per TradeOpen  FD
(2010b) the frequency of systemic capita GDP, the (+/−)
banking crises, the standard government
deviation of the growth rate expenditure/GDP, the
of private credit inflation rate, FDI

16 Wolde-Rufael Kenya 1966–2005 VAR Money supply/GDP, liquid Total trade/GDP FD  TradeOpen (+)
(2009) liabilities/GDP, domestic
bank credit to the private TradeOpen  FD
sector and total domestic (weak)
credit provided by the
banking sector (all percent of
GDP)

17 Gries et al. 16 SSA 1960s to VAR/VECM Commercial bank assets to Total trade/GDP TradeOpen  FD
(2009) countries 2003/2004 commercial bank plus central (weak)
bank assets, liquid
liabilities/GDP, and private
credit/GDP.

18 Braun and 73 countries During the 2SLS Private credit/GDP The change in the relative TradeOpen  FD (+)
Raddatz 1970s, 1980s strength of promoters
(2005) and 1990s

19 Do and 22 OECD 1965–1995 OLS, FE Total trade/GDP Private credit/GDP, liquid Initial level of private TradeOpen  FD
 Levchenko countries and liabilities/GDP, claims of credit/GDP, initial per (+/−)
(2004) 55 developing deposit money banks on capita GDP, human
countries nonfinancial domestic capital, legal origin
sectors/GDP dummies

20 Do and 96 countries 1970–1999 OLS, 2SLS Private credit/GDP The external finance needs Income, legal origin TradeOpen  FD
Levchenko of exports, total trade/GDP (+/−)
(2007)

21 Hauner et al. 91 countries 1973–2005 OLS, 2SLS, Domestic financial Average tariff rates (trade Agriculture FO  FD (weak)
(2013) SGMM liberalization openness), Financial liberalization, networks
openness (Abiad et al. 2010; liberalization, neighbor
Mody, 2005) DF (Alliance weights),
polity score, regime
durability, GDP per
capita, commodities
terms of trade

22 Aizenman and 83 countries 1982–1998 2FGLS Financial openness (the sum Per capita GDP, budget FO*TradeOpen 
Noy (2003) of total capital inflows and surplus, inflation, US FD (+/−)
outflows/GDP) treasury bill rate, trade
openness,
democracy/autocracy,
corruption

23 Aizenman Developing 1969–1998 The Prais- The sum of financial inflows Per capita GDP, budget FO*TradeOpen 
(2004) countries and Winsten and outflows/GDP surplus, trade openness, FD (+/−)
OECD algorithm democracy/autocracy,
assuming corruption, time
AR(1) error
 terms

24 Baltagi et al. 32 countries 1980–2003 GMM Private credit, stock market Trade openness, financial Real GDP per capita, TradeOpen  FD (+)
(2009) capitalization openness. institutional quality,
neighbour's trade FO  FD (+)
openness
FO*TradeOpen 
FD (+)

Notes: 2SLS - Two-stage least squares; FE - Fixed effect estimator; RE - Random effects estimator; LSDVC - Corrected least squares dummy variable estimator;
OLS - Ordinary least squares; DOLS - Dynamic OLS; DGMM – The generalized methods of moments estimator for dynamic panel data; GMM - The
generalized methods of moments estimator; SGMM – The system generalized methods of moments estimator; LLK - The local-linear kernel estimator; PMG -
Pooled mean group approach; MG - Mean group estimator; CCE - Common correlated effects estimator; AMG - Augmented mean-group estimator; IV -
Instrumental variables techniques; VAR - The vector autoregressive (VAR); VECM - The vector error correction model; 2FGLS - Two-step feasible generalized
least squares regression; PFMOLS - The panel fully modified ordinary least square approach; LM - The Lagrange multiplier; PGC - Panel Granger causality test.

Source: Author’s summary from the literature review