Copyright © 2002 International Development Options
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Volume Two Winter 2000-Spring 2001 Numbers 3-4.
FINANCIAL LIBERALIZATION AND THE BANKING CRISIS IN JAMAICA
Department of Economics
University of the West Indies
Mona Campus, Kingston 7, Jamaica
The West Indies
Published Online February 15, 2017
Financial liberalization in Jamaica was followed by a financial crisis that cost an estimated 40 percent of the gross domestic product (GDP). This article examines the underlying causes of the crisis. Institutional deficiencies are identified as the main factors that caused the process of financial liberalization to lead to the collapse of the banking sector. It is also argued that capital account liberalization necessitated macroeconomic policies that aggravated the structural weaknesses in the Jamaican banking system. The article concludes that where banking systems are weak, the costs of financial liberalization may outweigh the benefits.