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Financial liberalization and democracy: The role of reform reversals

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  • Coricelli, Fabrizio
  • Campos, Nauro

Abstract

The relationship between economic and political liberalization has received a great deal of attention lately, yet the possibility of a non-linear relationship and the role of reversals remain largely neglected. Focusing on democratization and financial reform, this paper offers evidence for a U-shaped relationship across countries, over time as well as in a panel setting using a wide range of estimators for various reform measures. We link this non-linear relationship to the notion of partial or captured democracy. We provide as well econometric support showing that even when de facto is modelled as a function of de jure financial liberalization, this non-linearity obtains.

Suggested Citation

  • Coricelli, Fabrizio & Campos, Nauro, 2009. "Financial liberalization and democracy: The role of reform reversals," CEPR Discussion Papers 7393, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7393
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    Cited by:

    1. Emmanuel Frot & Javier Santiso, 2013. "Political uncertainty and portfolio managers in emerging economies," Review of International Political Economy, Taylor & Francis Journals, vol. 20(1), pages 26-51, February.
    2. repec:wsr:wpaper:y:2012:i:082 is not listed on IDEAS
    3. Fabrizio Coricelli & Mathilde Maurel, 2011. "Growth and Crisis in Transition: A Comparative Perspective," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 49-64, February.
    4. Christiansen, Lone & Schindler, Martin & Tressel, Thierry, 2013. "Growth and structural reforms: A new assessment," Journal of International Economics, Elsevier, vol. 89(2), pages 347-356.
    5. Agoraki, Maria-Eleni K. & Kouretas, Georgios P. & Triantopoulos, Christos, 2020. "Democracy, regulation and competition in emerging banking systems," Economic Modelling, Elsevier, vol. 84(C), pages 190-202.
    6. Friedrich, Christian & Schnabel, Isabel & Zettelmeyer, Jeromin, 2013. "Financial integration and growth — Why is Emerging Europe different?," Journal of International Economics, Elsevier, vol. 89(2), pages 522-538.
    7. Markus Alzer & Ramin Dadasov, 2013. "Financial Liberalization and Institutional Development," Economics and Politics, Wiley Blackwell, vol. 25(3), pages 424-452, November.
    8. Mr. Marc G Quintyn & Ms. Genevieve Verdier, 2010. "Mother, Can I Trust the Government? Sustained Financial Deepening: A Political Institutionsview," IMF Working Papers 2010/210, International Monetary Fund.
    9. István P. Székely & Melanie Ward-Warmedinger, 2018. "Reform Reversals: Areas, Circumstances and Motivations," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(4), pages 559-582, December.
    10. Askarov, Zohid & Doucouliagos, Hristos, 2015. "Aid and institutions in transition economies," European Journal of Political Economy, Elsevier, vol. 38(C), pages 55-70.

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    More about this item

    Keywords

    Economic liberalization; Financial reform; Political liberalization; Reform reversals;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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