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Throughout the 1980s, Latin America experimented with financial liberalisation, which was supposed to solve the perpetual weaknesses of low savings, lack of access to capital, and the resulting stultifying effects on growth. We find that fundamental weaknesses in regional financial systems continue. We suggest that there are three basic policy reactions: a deepening of neoliberal policies; a neo-structural reform of them; and a Bolivarian social reform-oriented approach. While the neo-structural approach has yielded the most promising performance, it is still limited. We conclude that the success of reforms lies in understanding and changing the calculations of the political beneficiaries of the status quo. [ABSTRACT FROM AUTHOR]

This paper provides new evidence that sheds light on the influence of institutional quality, trade openness and financial liberalisation on financial market development, using data from 27 economies (the G-7, Europe, East Asia and Latin America) during 1980-2001. The dynamic panel data analysis results demonstrate that real income per capita and institutional quality are statistically significant determinants of banking sector development and capital market development. The trade openness, however, is more prominent in promoting capital market development. In terms of financial liberalisation, the empirical results suggest that domestic financial sector reforms tend to promote banking sector development, whereas stock market liberalisation is potent in delivering stock market development. Nevertheless, the financial liberalisation programmes are more responsive in developed economies. [ABSTRACT FROM AUTHOR]