Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms

Gunes Gokmen, Massimiliano Gaetano Onorato, Tommaso Nannicini, Chris Papageorgiou

Research output: Contribution to journalArticlepeer-review


It is commonly argued that crises open up a window of opportunity to implement policies that otherwise would not have the necessary political backing. The argument goes that the political cost of economic and social reforms declines as crises unravel structural problems that need to be urgently rectified and the public is more willing to bear the pains associated with such reforms. This paper casts doubt on this prevalent view by showing that not only is the crises-reforms nexus unfounded in the data, but rather crises are associated with a reversal of liberalization interventions depending on the institutional environment. In particular, we look at measures of liberalization in international trade, agriculture, network industries, and financial markets. We find that, in democratic countries, crises occurrences have no significant impact on liberalization measures. On the contrary, after a crisis, autocracies reduce liberalization in multiple economic sectors, which we interpret as the fear of regime change leading non-democratic rulers to please vested economic interests.
Original languageEnglish
Pages (from-to)2529-2552
JournalEconomic Journal
Issue number638
Early online date2021 Mar 10
Publication statusPublished - 2021

Subject classification (UKÄ)

  • Economics and Business

Free keywords

  • Financial crises, structural reforms, liberalization, institutional systems, IMF programs, government crises, public opinion


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