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What determines the likelihood of structural reforms?

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  • Agnello, Luca
  • Castro, Vitor
  • Jalles, João Tovar
  • Sousa, Ricardo M.

Abstract

We use data for a panel of 60 countries over the period 1980–2005 to investigate the main drivers of the likelihood of structural reforms. We find that: (i) external debt crises are the main trigger of financial and banking reforms; (ii) inflation and banking crises are the key drivers of external capital account reforms; (iii) banking crises also hasten financial reforms; and (iv) economic recessions play an important role in promoting the necessary consensus for financial, capital, banking and trade reforms, especially in the group of OECD-countries. Additionally, we also observe that the degree of globalisation is relevant for financial reforms, in particular in the group of non-OECD countries. Moreover, an increase in the income gap accelerates the implementation of structural reforms, but increased political fragmentation does not seem to have a significant impact.

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  • Agnello, Luca & Castro, Vitor & Jalles, João Tovar & Sousa, Ricardo M., 2015. "What determines the likelihood of structural reforms?," European Journal of Political Economy, Elsevier, vol. 37(C), pages 129-145.
  • Handle: RePEc:eee:poleco:v:37:y:2015:i:c:p:129-145
    DOI: 10.1016/j.ejpoleco.2014.10.007
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    2. Angana Banerji & Bergljot B Barkbu & James A John & Tidiane Kinda & Sergejs Saksonovs & Hanni Schoelermann & Tao Wu, 2015. "Building a Better Union; Incentivizing Structural Reforms in the Euro Area," IMF Working Papers 15/201, International Monetary Fund.
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    11. Malte Rieth & Lisa Gehrt, 2016. "What Causes the Delay in Reforms in Europe?," DIW Roundup: Politik im Fokus 99, DIW Berlin, German Institute for Economic Research.
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    17. Masciandaro, Donato & Romelli, Davide, 2018. "Central bankers as supervisors: Do crises matter?," European Journal of Political Economy, Elsevier, vol. 52(C), pages 120-140.

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    Keywords

    Structural reforms; Recessions; Globalisation; Crisis episodes; Political setup;

    JEL classification:

    • P11 - Economic Systems - - Capitalist Systems - - - Planning, Coordination, and Reform
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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