Financial Liberalization and Democracy: The Role of Reform Reversals

Nauro F. Campos () and Fabrizio Coricelli ()

No 4338, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: The relationship between economic and political liberalization has received a great deal of attention lately, yet the possibility of a nonlinear relationship and the role of reversals remain largely neglected. Focusing on democratization and financial reform, this paper offers evidence for a U-shaped relationship across countries, over time as well as in a panel setting using a wide range of estimators for various reform measures. We link this non-linear relationship to the notion of partial or captured democracy. We provide as well econometric support showing that even when de facto is modelled as a function of de jure financial liberalization, this non-linearity obtains.

Keywords: reform reversals; political liberalization; economic liberalization; financial reform (search for similar items in EconPapers)
JEL-codes: C23 D72 O38 P16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: 2009-08
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Working Paper: Financial liberalization and democracy: The role of reform reversals (2009)
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