Financial Sector Reforms in Developing Countries with Special Reference to Egypt Philip Arestis, The Levy Economics Institute of Bard College ABSTRACT Financial reforms, and financial liberalization in particular, have been at the root of many recent cases of financial and banking crises. In several countries financial reforms allowed real interest rates to reach levels exceeding 20 percent per annum in some cases; in other cases, banking and financial crises led to currency crises. National governments either abandoned attempts at implementing financial liberalization (some countries even reimposed controls) or were forced to intervene by nationalizing banks and guaranteeing deposits. This paper draws on this experience to show that the main cause of these crises is the application of a theoretical framework that is predicated on a number of assumptions that are problematic and based on weak empirical foundations. Consequently, it should be no surprise that the reforms were often unsuccessful and in many cases led to severe financial crises. We will also argue that the case of Egypt is particularly interesting in this regard, since although financial reforms have been enacted, the experience has been rather different: there has been no accompanying financial crisis.
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Paper provided by EconWPA in its series Economic History with number
0307001.
Length: 26 pages Date of creation: 18 Jul 2003 Date of revision: Handle: RePEc:wpa:wuwpeh:0307001
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Find related papers by JEL classification: N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
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