The The Impact of Financial Liberalization on Income Distribution: Analysis of G-7 Countries

Abstract

The impact of financial liberalisation on income distribution has attracted increasing attention. However, the debate on whether financial liberalisation is a gain or a loss is still ongoing. Especially in the 1990s, following the collapse of the Bretton Woods system, financial liberalisation became a globally widespread concept. While this concept constituted the basis of neoliberal policies, it emerged as a saviour solution in periods when state policies were dominant. Financial liberalisation means the implementation of policies and reforms that emphasise the liberalisation of the international financial system and the liberalisation of capital flows. In this period, processes such as liberalisation of capital flows, development of financial markets, deregulation of the banking sector and increased international financial integration have come to the fore. In this context, examining the impact of financial liberalisation on income distribution has become an important issue among economists and researchers. Moreover, among the countries where financial liberalisation policies have been implemented, some of them have achieved positive results, while in others they have led to costly crises. In this framework, the aim of this study is to examine the impact of financial liberalisation on G-7 countries during the 2008 crisis period. This is because the potential effects of financial liberalisation on developed countries during crisis periods are desired to be observed. In the study, the relationship between financial liberalisation and income distribution was analysed by panel data analysis method using data from 2003-2013. According to the results of the analysis, it is observed that financial liberalisation has a positive effect on income distribution in developed countries.