Theoretical Discussion of the Financial Liberalization: The Political Economy of a Policy’s Paradox

Benjamin García-Páez, Juan J. DelaCruz

Abstract


This paper argues the paradox that industrial countries and international financial organizationsrecommended less developed countries (LDCs) to reinforce their financial liberalization progressions. However, due to the current financial crisis, developed economies have to admit not taking the necessary policies themselves to circumvent the worst period of unbridled risk-taking by financial institutions. During the 1980s, industrialized economies feared LDCs fragile financial systems and their potential policy mismanagement given their lack of familiarity. Incongruously, markets have taken revenge on the “rentiers” and empirical evidence has shown that technocrats running the international financial system are also prone to big mistakes with adverse economic consequences.


Full Text: PDF DOI: 10.5539/ijef.v4n7p33

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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