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We examine both the long-run average and the year-by-year dynamic growth effects of stock market liberalization while controlling for the self-selection problem of policy adoption.We show that,although without any significant long-run effects,liberalization stimulates growth in the first four-year period following liberalization.However,this temporary phenomenon is driven by consumption rather than investment.Furthermore,the impact of liberalization on growth eventually becomes significantly negative since the 10th year of liberalization and is accompanied by lower investment growth and higher probabilities of currency crises.Our results suggest that the neo-classical growth theory cannot fully explain the true growth effects of liberalization.