What determines the likelihood of structural reforms?

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

Central bankers as supervisors: Do crises matter?

“…supports the idea that crises provide a strong impetuous to reform (see also Agnello et al, 2015;Waelti, 2015). It also complements other recent findings, such as Artha and de Haan (2015) who find that systemic banking crises, but also debt crises, significantly increase the likelihood that a central bank governor is dismissed (see also Dreher et al, 2008).…”

Beyond Conditionality: Policy Reversals in Southern Europe in the Aftermath of the Eurozone Crisis

“…For example, Chen (2009) argues that the failure of the privatisation of a given service often leads to a reversal of the delegation. Agnello et al (2015) show that episodes of negative growth are significantly associated with reversals of structural reforms. Given these two conflicting pressures between change and stability, responsibility and responsiveness, we expect contradictory (or compensatory) movements; towards change and towards persistence.…”

“…Similarly, Campos and Horváth (2012) build indexes of price and wage liberalisation; trade barriers and capital control liberalisation, and privatisation reforms; and subsequently codify reversals as a decrease in the value of these indexes. Abiad and Mody (2005), Agnello et al (2015) and Rajan and Zingales (2001) have also operationalised reversals along these lines. On the other hand, scholars sometimes understand reversals as a policy change, whichever its direction (either less or more liberalisation), that occurs after conditionality.…”

Social trust, institutional and political constraints on the executive and deregulation of markets

“…This may be interpreted as many veto-players being conducive for marketoriented economic reforms leading to lower government expenditures as share in GDP. More recently, Agnello et al (2015) find some evidence that increased legislative fractionalization speeds up the implementation of product market deregulation in OECD economies, and that a higher extent of legislative fractionalization may reduce capital account restrictions.…”