Do Financial Sector Reforms Lead to Financial Development? Evidence from a New Dataset
Thierry Tressel () and
Enrica Detragiache ()
No 08/265, IMF Working Papers from International Monetary Fund
This paper studies whether the policies that, over the past decades, liberalized bankingsystems around the world have resulted in deeper credit markets. To measure banking sectorreforms we use a new index that tracks policy changes in five separate areas for 91 countriesover 1973-2005. We find that reforms have led to financial deepening, but only in countrieswith institutions that place checks and balances on political power. We interpret this asevidence of a complementarity between financial sector reforms and political institutions thatprotect property rights. Other country characteristics do not seem to significantly influencethe effect of banking reforms on financial development.
Keywords: Credit policy; Banking systems; Economic reforms; Economic models; Financial sector; Political economy; Financial development, financial liberalization, property rights, banking, banking reform, banking sector, banking reforms, financial reforms, (search for similar items in EconPapers)
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