Abstract Three 2001-2002

GLOBAL

DEVELOPMENT STUDIES

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Volume Two Winter 2000-Spring 2001 Numbers 3-4.

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FINANCIAL LIBERALIZATION AND THE BANKING CRISIS IN JAMAICA

Marie Freckleton

Department of Economics

University of the West Indies

Mona Campus, Kingston 7, Jamaica

The West Indies

Published Online February 15, 2017

ABSTRACT

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.