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

This paper aims to empirically explore political determinantsof the magnitude of financial reforms, namely, under which conditionsa 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) effecton the magnitude of financial reforms is conditioned by politicalinstitutions is quantitatively examined using 30 developingcountries' data from 1973 to 2002. Results demonstrate thatthe IMF's effect on facilitating a big-bang type of financialreforms is contingent upon the number of veto players in thecase of a democratic government. Also, a non-democratic governmentis more likely to engage in big-bang type of financial reformsthan a democratic government, holding other conditions constant. Received for publication October 8, 2006. Accepted for publication December 12, 2006.