IMF Working Papers

Global Contagion of Financial Reforms

By Nan Li, Chris Papageorgiou, Tong Xu, Tao Zha

November 22, 2024

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Format: Chicago

Nan Li, Chris Papageorgiou, Tong Xu, and Tao Zha. "Global Contagion of Financial Reforms", IMF Working Papers 2024, 243 (2024), accessed January 23, 2025, https://doi.org/10.5089/9798400295980.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We construct an extensive database of domestic financial reforms spanning 90 countries from 1973 to 2014. Utilizing this dataset, we estimate a structural model that incorporates various factors identified in the existing literature to explain the global contagion of financial reforms. Our findings reveal that (1) geopolitical influence and cross-country learning were the primary drivers behind the marked increase in financial reforms globally during the 1990s, and (2) the observed reversals of financial reforms in developing countries after the global financial crisis were driven by shifts in beliefs about the impact of these reforms on growth.

Subject: Economic sectors, Financial contagion, Financial crises, Financial Sector, Financial sector policy and analysis, Global financial crisis of 2008-2009

Keywords: Belief updating, Cross- country learning, Economic growth, Financial contagion, Financial crisis, Financial liberalization, Financial reforms, Financial sector, Geopolitical influence, Global, Global contagion, Global financial crisis of 2008-2009, IMF working paper 24/243, Liberalization level, Political costs, Reform contagion, Reform intensity, Reform reversal

Publication Details

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