When does financial sector (in)stability induce financial reforms?

Susie Lee and Ingmar Schumacher
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Susie Lee: Lehrstuhl fur Kommunal - und Umweltokonomie - Uni Trier - Trier Universität = Trier University = Université de Trèves

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Abstract: The article studies whether financial sector (in)stability had an effect on reforms in the financial sector in a large cross-country panel from 1990 to 2005. We forward the theory that countries are more likely to liberalize their financial sectors in times of financial stability. We argue that politicians are less likely to undertake financial reforms if they face a strong lobby in the financial sector which is able to block reforms that are not in its interest. Our empirical results suggest that financial instability leads to regulations, while financial stability is found to induce liberalizations. We also find that weaker financial lobbies are unable to block financial reforms while strong lobbies can effectively stop reforms.

Keywords: Financial reforms; interest group theory; financial stability; financial crises (search for similar items in EconPapers)
Date: 2011-11-03
New Economics Papers: this item is included in nep-fmk
Note: View the original document on HAL open archive server: https://hal.science/hal-00637954v1
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Citations: View citations in EconPapers (7)

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