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Do Financial Sector Reforms Lead to Financial Development? Evidence from a New Dataset

Author/Editor: Tressel, Thierry | Detragiache, Enrica
Authorized for Distribution: December 1, 2008
Electronic Access: Free Full Text (PDF file size is 713KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper studies whether the policies that, over the past decades, liberalized bankingsystems around the world have resulted in deeper credit markets. To measure banking sectorreforms we use a new index that tracks policy changes in five separate areas for 91 countriesover 1973-2005. We find that reforms have led to financial deepening, but only in countrieswith institutions that place checks and balances on political power. We interpret this asevidence of a complementarity between financial sector reforms and political institutions thatprotect property rights. Other country characteristics do not seem to significantly influencethe effect of banking reforms on financial development.
 
Series: Working Paper No. 08/265
Subject(s): Economic reforms | Financial sector | Development | Banking systems | Political economy | Credit policy | Economic models
Author's keyword(s): Financial development | financial liberalization | property rights
 
English  
    Published:   December 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008265   Pages:   42
    Price:   US$18.00
       
     
Please address any questions about this title to publications@imf.org.