Financial Reform: What Shakes it? What Shapes it?

40 Pages Posted: 28 Jan 2006

See all articles by Abdul G. Abiad

Abdul G. Abiad

International Monetary Fund (IMF) - Research Department

Ashoka Mody

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: April 2003

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: Financial reform, political economy, status quo bias

JEL Classification: P11, P16, P34, N20, G28

Suggested Citation

Abiad, Abdul G. and Mody, Ashoka, Financial Reform: What Shakes it? What Shapes it? (April 2003). IMF Working Paper, Vol. , pp. 1-40, 2003. Available at SSRN: https://ssrn.com/abstract=879145

Abdul G. Abiad (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Ashoka Mody

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-9617 (Phone)
202-589-9617 (Fax)

HOME PAGE: http://www.amody.com

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