'Mother, Can I Trust the Government?' Sustained Financial Deepening - A Political Institutions View

48 Pages Posted: 16 Sep 2010

See all articles by Genevieve Verdier

Genevieve Verdier

International Monetary Fund (IMF) - IMF Institute

Marc Quintyn

International Monetary Fund (IMF)

Date Written: September 15, 2010

Abstract

Only a minority of countries have succeeded in establishing a developed financial system, despite widespread financial liberalization. Confronted with this finding, the “political institutions view” claims that sustained financial deepening is most likely to take place in institutional environments where governments effectively impose constraints on their own powers in order to create trust. This paper identifies over 200 post-1960 episodes of accelerations in financial development in a large cross-section of countries. We find that the likelihood of an acceleration leading to sustained financial development increases greatly in environments that have high-quality political institutions.

Keywords: G18, G28, N20, O16

JEL Classification: Financial development, political institutions, financial liberalization

Suggested Citation

Verdier, Genevieve and Quintyn, Marc, 'Mother, Can I Trust the Government?' Sustained Financial Deepening - A Political Institutions View (September 15, 2010). Available at SSRN: https://ssrn.com/abstract=1677574 or http://dx.doi.org/10.2139/ssrn.1677574

Genevieve Verdier

International Monetary Fund (IMF) - IMF Institute ( email )

700 19 th Street NW
Washington, DC 20431
United States

Marc Quintyn (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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