What determines the likelihood of structural reforms?

•External debt crises are the main trigger of financial and banking reforms.•Inflation and banking crises are key drivers of external capital account reforms.•Economic recessions promote reforms, especially in the group of OECD-countries.•Globalisation is relevant for financial reforms, especially for non-OECD countries.•An increase in the income gap accelerates the implementation of structural reforms.

We use data for a panel of 60 countries over the period 1980-2005 to investigate the main drivers of the likelihood of structural reforms. We find that: (i) external debt crises are the main trigger of financial and banking reforms; (ii) inflation and banking crises are the key drivers of external capital account reforms; (iii) banking crises also hasten financial reforms; and (iv) economic recessions play an important role in promoting the necessary consensus for financial, capital, banking and trade reforms, especially in the group of OECD-countries. Additionally, we also observe that the degree of globalisation is relevant for financial reforms, in particular in the group of non-OECD countries. Moreover, an increase in the income gap accelerates the implementation of structural reforms, but increased political fragmentation does not seem to have a significant impact.