Assessing the robustness of the relationship between financial reforms and banking crises

PABLO GLUZMANN; MARTIN GUZMAN

Journal of International Financial Markets, Institutions and Money

Elsevier Ltd

Lugar: Victoria; Año: 2017 vol. 49 p. 32 - 47

1042-4431

This paper provides a novel approach for assessing the robustness of the relationship between different types of financial reforms and banking crises for the period 1973?2005. We document the following facts for emerging economies: (i) liberalizations of capital accounts, securities markets, interest rates, removal of credit controls, barriers to entry, and reduction of state ownership in the banking sector, all are positively associated with a higher frequency of banking crises; (ii) the increase in financial turbulence is mainly concentrated within a time-window of five years after the reforms: If a country does not experience a banking crisis within that period, the probability of experiencing a crisis afterwards becomes insignificant; and (iii) the results are robust to the inclusion of all control variables that have been found in the literature as significant determinants of banking crises.