Based on Considering the Financial Risk in an Overall Research Framework, Analyzing the Relationship between the Economic Fluctuation and Financial Opening in the Developing Countries

Abstract

In every country, especially the developing countries, the government has the duty to reduce economic fluctuations, and the duty is always the most important policy. In the past study, there had been debate whether financial opening will increase the economic fluctuation. Based on Aghion et al. (2004) open economy model analysis, we can get the conclusion that, the economic fluctuation will not increase by financial opening in the developing countries if the financial risks is not high. This article analyzed the annual data of 48 developing countries by Using threshold regression model, and the result shows that financial opening rose 1 percentage point would reduce the 1.76 percentage point of economic fluctuations as the developing countries at a low financial risk.