Sources and legitimacy of financial liberalization
AbstractThis article seeks to clarify how we understand domestic and international sources of globalization and specifically how we explain financial liberalization across countries. The article also develops our understanding of the underlying legitimacy of financial liberalization. We debate e.g. Abiad and Mody (2005) and others who have found political factors to have little impact on financial openness. Using the same data undergirding such conclusions we argue, in contrast, that even a slight broadening of the political variables employed in the model and much closer attention to “input” and “output” aspects of the political legitimacy of financial liberalization over time reveal a more central role for politics in shaping liberalization. Input legitimacy involves the representation of stakeholders in initial and ongoing decisions to liberalize, while “output” legitimacy concerns liberalization's distributional consequences and management thereof over time. Several empirical measures of domestic-national and international political factors plausibly influence such aspects of legitimacy and are found to play a significant role in shaping liberalization, suggesting legitimation politics to be more important to financial openness than existing studies have typically acknowledged.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Political Economy.
Volume (Year): 28 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/505544
Financial openness; Liberalization dynamics; Financial regulation; Political legitimacy; Political variables; Financial reform;
Other versions of this item:
- Brian Burgoon & Panicos O. Demetriades & Geoffrey R.D. Underhill, 2011. "Sources and Legitimacy of Financial Liberalization," Discussion Papers in Economics 11/45, Department of Economics, University of Leicester.
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- F3 - International Economics - - International Finance
- F5 - International Economics - - International Relations, National Security, and International Political Economy
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