Financial liberalization and stability of the financial system in emerging markets: the institutional dimension of financial crises.

Emerging economies, which have since the end of the 1980s implemented a process of financial liberalization, are confronted at the same time with a banking crises. The latter highlights the role played by the institutional framework in the process of financial liberalization. The objective of this paper is to go through the usual alternatives of too much/too little market in order to explain that the success of any liberalization process relies on the complementarity between market and intermediation. Institutions, defined as rule-following behaviour, represented the cornerstone of such an evolution. The point is that the solution to financial instability is to be found within the institutional dynamics in which emerging economies may benefit from intermediation in order to enforce the market process. [ABSTRACT FROM AUTHOR]