IESET.
Hypotheses·growth·financial_liberalisation_crisis_risk

Financial liberalisation (capital-account opening, domestic interest-rate deregulation, removal of credit controls) without prudential regulation (strong supervision, capital adequacy, macro-prudential buffers) raises the probability and severity of banking and currency crises, which can erase long-run market-reform gains in GDP per capita.

The claim applies to middle-income emerging markets 1975-2020 and challenges the assumption that financial opening is unconditionally welfare-improving.

SUPPORTEDengine/runs/financial_liberalisation_crisis_risk

SUPPORTED — coef=-0.02303 (sign matches claim -), p=4.44e-16

confidence cueThis is a clear pass for the claim as written. It still applies only to this sample, period, and method.

policy briefClear support

In ordinary language

Over a long period, do more market-oriented institutions translate into higher income or productivity, once the comparison looks beyond a single success story?

plain answer

The data clearly moved in the predicted direction. coef=-0.02303 (sign matches claim -), p=4.44e-16

why it matters

Growth claims can look convincing in single success stories. This test asks whether the pattern survives a broader comparison.

how the test works

It compares 34 country or place units from 1975 to 2020, using a panel fe design, with fixed effects for country and year.

what was measured
What changed
  • Financial liberalisation index
  • Prudential strength proxy
What we checked
  • Banking crisis indicator
  • Currency crisis indicator
  • Crisis output loss
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

9 input datasets, 0 unresolved missing series, provenance status: reproducible hash verified.

Results

engine/runs/financial_liberalisation_crisis_risk
1007550250197519982020MEXARGBRACHLCOLPERURY
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show banking_crisis_indicator across 34 sampled countries over 1975–2020.
The shapes above are stylised — none of the lines are real data.
Placeholder for financial_liberalisation_crisis_risk. Published chart will be generated from engine/runs/financial_liberalisation_crisis_risk/chart_data.json.

Who has skin in the game — schools predicting on this

8 schools list this hypothesis as a test of their position. The chips below are school-level scoreboard outcomes, not a second hypothesis verdict.

hypothesis verdict vs scoreboard outcome

The banner verdict judges this hypothesis as written. The scoreboard asks whether each school's polarity-corrected prediction was right. Raw status is not a school win: SUPPORTED supports schools that needed SUPPORTED, but refutes schools that needed REFUTED.

Degrowth / Ecological Macroeconomicswins if MIXEDpartial/no-callDemocratic Socialism (Bernsteinian revisionism + modern)wins if SUPPORTEDschool supportedEco-Socialism / Red-Greenwins if SUPPORTEDschool supportedMarket Socialism (Lange-Lerner tradition)wins if SUPPORTEDschool supportedMarxian Political Economywins if SUPPORTEDschool supportedMarxism-Leninism (central-planning implementation)wins if SUPPORTEDschool supportedModern Monetary Theorywins if SUPPORTEDschool supportedPost-Keynesianwins if SUPPORTEDschool supported

Pre-registration

pre-registered
first-spec commit 5ce4495 · 2026-05-02T19:11:20Z
run generated · 2026-06-29T17:52:48Z

Financial liberalisation (capital-account opening, domestic interest-rate deregulation, removal of credit controls) without prudential regulation (strong supervision, capital adequacy, macro-prudential buffers) raises the probability and severity of banking and currency crises, which can erase long-run market-reform gains in GDP per capita. The claim applies to middle-income emerging markets 1975-2020 and challenges the assumption that financial opening is unconditionally welfare-improving.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

The hypothesis is falsified if the interaction between financial liberalisation and prudential-strength proxy is not significantly negative, or if the interaction sign flips positive at conventional significance after controls for credit growth and current-account balance.

formal test & threshold
test:      panel_fe_financial_liberalisation_crisis_risk_1975_2020
threshold: [object Object]

Method

Template
panel_fe
Fixed effects
country, year
Clustering
country
Sample
34 countries · 1975 – 2020
Evidence type
associational

Data

VariableSourceTransform
banking_crisis_indicator
outcome
laeven_valencia:banking_crisis_indicatortier 5
indicator
currency_crisis_indicator
outcome
laeven_valencia:currency_crisis_indicatortier 5
indicator
crisis_output_loss
outcome
laeven_valencia:peak_to_trough_gdp_loss_crisis_yearstier 5
level
financial_liberalisation_index
treatment
chinn_ito:kaopentier 2
level
prudential_strength_proxy
treatment
world_bank_wdi:FB.BNK.CAPA.ZStier 2
level
log_gdp_per_capita
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
credit_gdp_ratio
control
world_bank_wdi:GFDD.DI.14tier 2
log
current_account_balance_gdp
control
world_bank_wdi:BN.CAB.XOKA.GD.ZStier 2
level
exchange_rate_pressure_proxy
control
world_bank_wdi:PA.NUS.FCRFtier 2
log

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — financial_liberalisation_crisis_risk

Verdict: SUPPORTED — coef=-0.02303 (sign matches claim -), p=4.44e-16

Pre-registration

  • Claim: Financial liberalisation (capital-account opening, domestic interest-rate deregulation, removal of credit controls) without prudential regulation (strong supervision, capital adequacy, macro-prudential buffers) raises the probability and severity of banking and currency crises, which can erase long-run market-reform gains in GDP per capita. The claim applies to middle-income emerging markets 1975-2020 and challenges the assumption that financial opening is unconditionally welfare-improving.
  • Falsification rule: The hypothesis is falsified if the interaction between financial liberalisation and prudential-strength proxy is not significantly negative, or if the interaction sign flips positive at conventional significance after controls for credit growth and current-account balance.
  • Falsification test: panel_fe_financial_liberalisation_crisis_risk_1975_2020

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): -0.02303
  • Std error: 0.002756
  • p-value: 4.44e-16
  • Observations: 754, countries: 24
  • Within R²: 0.00795
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • laeven_valencia:banking_crisis_indicator → banking_crisis_indicator (outcome, publisher=laeven_valencia, n=1564)
  • laeven_valencia:currency_crisis_indicator → currency_crisis_indicator (outcome, publisher=laeven_valencia, n=1564)
  • laeven_valencia:peak_to_trough_gdp_loss_crisis_years → crisis_output_loss (outcome, publisher=laeven_valencia, n=1563)
  • chinn_ito:kaopen → financial_liberalisation_index (treatment, publisher=chinn_ito, n=7986)
  • world_bank_wdi:FB.BNK.CAPA.ZS → prudential_strength_proxy (treatment, publisher=world_bank_wdi, n=2061)
  • world_bank_wdi:NY.GDP.PCAP.KD → log_gdp_per_capita (controls, publisher=world_bank_wdi, n=12104)
  • world_bank_wdi:GFDD.DI.14 → credit_gdp_ratio (controls, publisher=world_bank_wdi, n=6564)
  • world_bank_wdi:BN.CAB.XOKA.GD.ZS → current_account_balance_gdp (controls, publisher=world_bank_wdi, n=7621)
  • world_bank_wdi:PA.NUS.FCRF → exchange_rate_pressure_proxy (controls, publisher=world_bank_wdi, n=12385)

Generated by scripts/run_panel_fe.py at 2026-06-29T17:52:48+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Authored framework. Read the transparency note.