Financial Reform: What Shakes it? What Shapes it?

Ashoka Mody and Abdul Abiad

No 2003/070, IMF Working Papers from International Monetary Fund

Abstract: Despite stops, gaps, and reversals, financial reforms advanced worldwide in the last quarter century. Using a new index of financial liberalization, we conclude that influential events shook the status quo, inducing both reforms and reversals, while learning, more so than ideology and country structure, shaped and sustained widespread reforms. Among shocks, a decline in global interest rates and balance of payments crises strengthened reformers; banking crises were associated with reversals, while new governments brought about both reforms and reversals. Learning occurred domestically-initial reforms raised the likelihood of further reforms-and through observing regional reform leaders. Among structural features, greater openness to trade appears to have increased the pace of financial reform.

Keywords: WP; status quo; balance of payments; Financial reform; political economy; status quo bias; liberalization process; policy reform; political orientation; policy liberalization; left-wing government; policy regime; reform process; country dummy; reform momentum; centrist government; liberalization experience; right wing; Financial sector; Banking crises; Interest rate policy; Multilateral development institutions; Financial sector reform; Global (search for similar items in EconPapers)
Pages: 40
Date: 2003-04-01
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Citations: View citations in EconPapers (39)

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Journal Article: Financial Reform: What Shakes It? What Shapes It? (2005)
Working Paper: Financial Reform: What Shakes It? What Shapes It? (2005)
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