Do crises really lead to more institutional reforms? This paper explores the
connection between financial crises and one type of reform frequently advocated during
the recent global financial crisis, namely, fiscal institutional reforms. Some authors
expect that crises lead to reforms, but we demonstrate that the relationship is not so
straightforward. Using a data set of Latin American countries that experienced several
crises and also several periods of reform in the period from 1990 to 2005, we find that
the type of crisis and its duration matter. We argue that reforms are less likely during
a banking crisis, whereas fiscal crises are most likely to lead to fiscal reforms. This
means that the type of economic crisis is important for explaining the likelihood of
reforms. We explore other possible explanations for reform, such as the partisanship of
the president and whether a country is under an IMF program, and do not find confirming
evidence for alternative explanations.
JEL Classification: D72, H12, H62,
H63.