Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms

Gunes Gokmen, Tommaso Nannicini, Massimiliano Onorato and Chris Papageorgiou ()

No 12932, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: It is commonly argued that crises open up a window of opportunity to implement policies that otherwise would not have the necessary political backing. The argument goes that the political cost of deep reforms declines as crises unravel structural problems that need to be urgently rectified and the public is more willing to bear the pains associated with such reforms. This paper casts doubt on this prevalent view by showing that not only the crises-reforms nexus is unfounded in the data, but rather crises are associated with slowing structural reforms depending on the institutional environment. In particular, we look at measures of reforms in international trade, agriculture, network industries, and financial markets. We find that, after a financial crisis, democracies neither open nor close their economy. On the contrary, autocracies reduce reforms in multiple economic sectors, as the fear of regime change lead non-democratic rulers to please vested economic interests.

Keywords: financial crises; structural reforms; institutional systems; IMF programs; government crises; public opinion (search for similar items in EconPapers)
JEL-codes: E44 G01 L51 P16 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2020-01
New Economics Papers: this item is included in nep-mac and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Economic Journal, 2021, 131 (638), 2529-2552

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Related works:
Journal Article: Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms (2021)
Working Paper: Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms (2017)
Working Paper: Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms (2017)
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