Exploring political determinants of the magnitude of financial reforms in developing countries

This paper aims to empirically explore political determinants of the magnitude of financial reforms, namely, under which conditions a country is more likely to choose a 'big-bang' type of financial reform versus a gradual financial reform. Especially, how the International Monetary Fund's (IMF's) effect on the magnitude of financial reforms is conditioned by political institutions is quantitatively examined using 30 developing countries' data from 1973 to 2002. Results demonstrate that the IMF's effect on facilitating a big-bang type of financial reforms is contingent upon the number of veto players in the case of a democratic government. Also, a non-democratic government is more likely to engage in big-bang type of financial reforms than a democratic government, holding other conditions constant.