Political Competition and Financial Stability in the Developing World

Choe Wongi

doi:10.14731/kjis.2006.12.46.5.153

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한국국제정치학회
국제정치논총 학술저널
The Korean Journal of International Relations Vol.46 No.5
2006.12 153 - 182 (30page)
DOI : 10.14731/kjis.2006.12.46.5.153

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Choe Wongi

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This paper examines the ways in which electoral competition and institutional distribution of veto players in domestic politics influence the robustness of banking regulation and financial stability in developing world. I conduct a cross-section time-series multivariate logistic regression on a banking crisis data set for 60 developing countries from 1974 through 1997. Using outbreak of banking crisis as a measure of the robustness of banking regulations, I examine how political institutional variables affect the likelihood of outbreak of banking crisis in developing world. I find that greater electoral competition is associated with less likelihood of banking crisis. I also find that the most dominant argument in the field of market reform that centralized decision making is most conducive for market reform is not significant in the case of banking regulation. These findings have broad implications for research on the political determinants of policy outcomes in general and financial reform in particular.

#political competition #financial liberalization #financial stability #developing countries