Do Financial Sector Reforms Lead to Financial Development? Evidence from a New Dataset

December 1, 2008

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Format: Chicago

Thierry Tressel, and Enrica Detragiache. Do Financial Sector Reforms Lead to Financial Development? Evidence from a New Dataset, (USA: International Monetary Fund, 2008) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper studies whether the policies that, over the past decades, liberalized bankingsystems around the world have resulted in deeper credit markets. To measure banking sectorreforms we use a new index that tracks policy changes in five separate areas for 91 countriesover 1973-2005. We find that reforms have led to financial deepening, but only in countrieswith institutions that place checks and balances on political power. We interpret this asevidence of a complementarity between financial sector reforms and political institutions thatprotect property rights. Other country characteristics do not seem to significantly influencethe effect of banking reforms on financial development.

Subject: Bank credit, Banking, Commercial banks, Credit, Financial sector development

Keywords: Banking reform index, Control variable, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/265
Stock No:

WPIEA2008265
ISBN:

9781451871234
ISSN:

1018-5941

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