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Financial Liberalization, Economic Growth, Stability and Financial Market Development in Emerging Markets Financial Liberalization, Economic Growth, Stability and Financial Market Development in Emerging Markets Pietro Masci, Department of the Treasury, Rome Introduction This paper provides stylized facts with respect to the relationships among financial liberalization, economic growth, stability, and financial market development, with a focus on emerging countries and particularly on Latin America and Caribbean countries in the context of the increasing use of the domestic currency in emerging markets and the issue of access to finance. Since the crisis of the late 1990s and early 2000s, many emerging market countries have directed greater attention and support toward developing domestic financial markets with long- term view and also to permit access to finance to various segments of the population as well as to entrepreneurs in the Schumpeterian sense 1. This stance is mainly centered on better prudential regulation and professional management of government debt and bonds. It is different from the past, when emerging market economies relied on financial liberalization to access foreign rather than domestic markets for selected entities including the government, state –owned enterprises and big corporations. This new approach significantly changes the impact of financial liberalization on economic growth, financial sector development, and vulnerability to financial crises. The models of economic growth constitute a starting point for the analysis. Solow’s 2 model —in line with the neoclassical view of the loanable theory of funds—does not make referen