Do stock market liberalizations cause investment booms?

Stock market liberalizations lead private investment booms. In a sample of Il developing countries that liberalized their stock markets, 9 experience growth rates of private investment above their non-liberalization median in the first year after liberalizing. In the second and third years after lib eralization, this number is 10 of 11 and 8 of 11, respectively. The mean gr owth rate of private investment in the three years immediately following st ock market liberalization exceeds the sample mean by 22 percentage points. The evidence stands in sharp contrast to recent work that suggests capital account liberalization has no effect on investment. (C) 2000 Elsevier Scien ce S.A. All rights reserved. JEL classification: F3; F4; G15.