Financial Crises and Liberalisation: Progress or Reversals?

Paul De Grauwe, Orkun Saka, ,, Yuemei Ji () and Angelo Martelli
Authors registered in the RePEc Author Service: Nauro F. Campos

No 13776, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Financial crisis can trigger policy reversals, i.e. they can lead to a process of re- regulation of financial markets. Using a recent comprehensive dataset on financial liberalization across 94 countries for the period between 1973 and 2015, we formally test the validity of this prediction for the member states of the European Union as well as for a global sample. We contribute by (a) using a new up-to-date dataset of reforms and crises and (b) subjecting it to a combination of diff erence-in-di fferences and local projection estimations. In the global sample, our fi ndings consistently confi rm that crises lead to a reversal of liberal reforms, suggesting that governments react to crises by re-regulating financial markets. However, in a dynamic setting with impulse-responses, we also find that these new regulations are only temporary and a liberalization process restarts a few years after a financial crisis. One decade later, fi nancial markets have returned to their pre-crisis level of liberalization. In the EU sample, however, we do not fi nd sucient evidence to support these observations.

Keywords: Financial reforms; Financial crises; Reform reversals; Local projections (search for similar items in EconPapers)
JEL-codes: G01 G28 P11 P16 (search for similar items in EconPapers)
Date: 2019-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Financial crises and liberalization: progress or reversals? (2019)
Working Paper: Financial Crises and Liberalization: Progress or Reversals? (2019)
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