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Financial crises and liberalization: progress or reversals?

Saka, Orkun, Campos, Nauro F., De Grauwe, Paul, Ji, Yuemei and Martelli, Angelo (2020) Financial crises and liberalization: progress or reversals? In: Campos, Nauro F., De Grauwe, Paul and Ji, Yuemei, (eds.) Economic Growth and Structural Reforms in Europe. Cambrige University Press, Cambridge, UK, 177 - 213. ISBN 9781108479110

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Identification Number: 10.1017/9781108782517.009


Financial crisis could play a key role in changing the policy equilibrium concerning financial markets and institutions. Using a recent comprehensive dataset on financial liberalization across ninety-four countries for the period between 1973 and 2015, we formally test the validity of this prediction for the member states of the European Union as well as a global sample. We contribute by (a) using a new up-to-date dataset of reforms and crises and (b) subjecting it to a combination of difference-in-differences and local projection estimations. In the global sample, our findings on the causal relationship between crises and liberal reforms consistently point out a negative direction between the two, suggesting that governments react to crises by intervening in financial markets. However, in a dynamic setting with impulse responses, we also illustrate that such interventions are only temporary and liberalization process restarts after a financial crisis. In the EU sample, however, we do not find sufficient evidence to support either of these observations.

Item Type: Book Section
Official URL:
Additional Information: © 2020 Cambridge University Press
Divisions: European Institute
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
J Political Science > JN Political institutions (Europe)
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
P - Economic Systems > P1 - Capitalist Systems > P11 - Planning, Coordination, and Reform
P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy
Date Deposited: 26 May 2022 10:45
Last Modified: 26 May 2022 10:45

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