Policies in hard times: assessing the impact of financial crises on structural reforms

It is argued that crises open up a window of opportunity to implement policies that otherwise would not have the necessary political backing. We show that not only is the crises-reforms nexus unfounded in the data, but rather crises are associated with a reversal of liberalisation interventions depending on the institutional environment. We find that, in democratic countries, crises occurrences have no significant impact on liberalisation measures. On the contrary, after a crisis, autocracies reduce liberalisation in multiple economic sectors, which we interpret as the fear of regime change leading non-democratic rulers to please vested economic interests.