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Financial crises and liberalization: progress or reversals?
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posted on 2023-06-09, 19:27 authored by Orkun Saka, Nauro F Campos, Paul De Grauwe, Yuemei Ji, Angelo MartelliFinancial crisis could play a key role in changing the policy equilibrium concerning financial markets and institutions. Using a recent comprehensive dataset on financial liberalization across 94 countries for the period between 1973 and 2015, we formally test the validity of this prediction for the member states of the European Union as well as a global sample. We contribute by (a) using a new up-to-date dataset of reforms and crises and (b) subjecting it to a combination of difference-in-differences and local projection estimations. In the global sample, our findings on the causal relationship between crises and liberal reforms consistently point out a negative direction between the two, suggesting that governments react to crises by intervening in financial markets. However, in a dynamic setting with impulse-responses, we also illustrate that such interventions are only temporary and liberalization process restarts after a financial crisis. In the EU sample, however, we do not find sufficient evidence to support either of these observations.
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Publication status
- Published
File Version
- Accepted version
Publisher
Cambridge University PressPages
464.0Book title
Economic growth and structural reforms in EuropePlace of publication
CambridgeISBN
9781108479110Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- No
Editors
Paul De Grauwe, Nauro F Campos, Yuemei JiLegacy Posted Date
2019-10-30First Compliant Deposit (FCD) Date
2019-10-23Usage metrics
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