Social Sciences
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Item The Impact of Financial Liberalization on the Sri Lankan Economy:1977-2012(Research Centre for Social Sciences, Faculty of Social Sciences, University of Kelaniya, Sri Lanka, 2016) Adikari, A.M.P.This study examines the impact of financial liberalization on the Sri Lankan economy over the time series annual data from 1978 to 2012. The study examines the impact of financial liberalization on selected economic variables: domestic investment, savings, narrow and broad money and economic growth in the Sri Lanka economy. The Ordinary Least Square (OLS) method based on the Vector Auto Regression (VAR) model and the Granger Causality test were conducted to find out the long-term relationship among the variables concerned in the equations developed to test the hypotheses. An index has been constructed using six major components of financial liberalization namely; interest rate deregulation, reserve requirements and credit ceilings, international capital flows, banking sector entry and competition, securities market reforms and banking sector supervision. Principal Components Analysis (PCA) method is used to construct this index and, it is used as a proxy of financial liberalization to examine the impact of financial liberalization on economic growth, savings, investments and money demand in Sri Lanka. The findings result include a confirmation of significant and positive long-term relationship between financial liberalization and economic growth in the Sri Lankan economy i.e., positive impact on national savings and on domestic investment. From the findings of the study, financial liberalization was found to have positively impacted on broad money and negatively impacted on narrow money in Sri Lanka. In terms of policy implications,effective role of the government in providing must play a leading role as a facilitator by providing appropriate legislation to strengthen the financial system, developing institutional setup, strengthening bank supervision allowing market forces to operate in the financial market. Are suggestedItem Financial Liberalization Index for Sri Lanka(Faculty of Social Sciences, University of Kelaniya, Sri Lanka, 2015) Adikari, A.M.P.Financial liberalization is a process of liberalizing the financial system of an economy by reducing controls in interest rates, financial intermediaries, and markets. Since the mid-1980s, the World Bank and the International Monetary Fund (IMF) started financial liberalization as a basic frame work for developing member countries to accelerate economic growth. Sri Lanka has been involved this process since 1977.This study attempts to establish an index to evaluate the complex process of financial liberalization in Sri Lanka by focusing on important changes in the financial sector. The study has used major policy components of financial liberalization to construct financial liberalization index at a particular time. In order to derive the index, an arbitrary value is assigned to each of the policy variables. Each policy variable can take a value between 0 and1.The value is depending on the implementation phases of the policy. Time series annual data from1977 to 2011 are used to construct the index. The principle Component Method is used as an analysis method. This index is helpful to evaluate the impact of financial liberalization policies on various aspect of the economy. The constructed index shows that financial liberalization has gradually increased from 1997to 2011, though the policies are implemented since 1977 in Sri Lanka.