Mother, Can I Trust the Government? Sustained Financial Deepening: A Political Institutionsview

Author/Editor:

Marc G Quintyn ; Genevieve Verdier

Publication Date:

September 1, 2010

Electronic Access:

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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:

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.

Series:

Working Paper No. 2010/210

Subject:

Banking Credit Credit booms Financial crises Financial markets Financial sector development Legal support in revenue administration Money Revenue administration

English

Publication Date:

September 1, 2010

ISBN/ISSN:

9781455205417/1018-5941

Stock No:

WPIEA2010210

Pages:

42

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