How the study was done

• Pages: 208

Page 208

One constraint in analyzing the various forces that produce transitions to financial liberalization has been the lack of a cross-country data set. The Abiad-Mody study uses a new financial liberalization index, compiled by the IMF Research Department's Financial Studies Division, and covering 35 countries. The index allows a more precise determination of the timing and significance of various events cumulating in a financial liberalization process.

The index recognizes the multifaceted nature of financial reform and is an annual aggregation of financial reform along six dimensions.

The six facets that characterize the financial sector policy are directed credit/reserve requirements; interest rate controls; entry barriers and/or lack of pro-competition policies; restrictive operational regulations and/or lack of prudential regulations; the...