Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms

It is argued that crises open up a window of opportunity to implement policies that otherwise would not have the necessary political backing. We show that not only is the crises–reforms nexus unfounded in the data, but rather crises are associated with a reversal of liberalisation interventions depending on the institutional environment. We find that, in democratic countries, crises occurrences have no significant impact on liberalisation measures. On the contrary, after a crisis, autocracies reduce liberalisation in multiple economic sectors, which we interpret as the fear of regime change leading non-democratic rulers to please vested economic interests.