inclusion, for example, in credit (trff1). The differences between the top 25 percent and the bottom 25 percent of countries in financial inclusion suggest that countries with less financial inclusion could be more focused on defining their financial development goals (obj1), including through quantitative indicators (obj2).

Table 7 (column 2, row 3) implies that there is no significant difference across countries with different experience of banking crises in regard to formulating a financial sector strategy. Only when considering zero versus one crisis do the data suggest that countries with experience of one crisis are more likely (at the 5 percent significance level) to clearly assign responsibilities for implementing the formulated strategy to individual government agencies (imp1). Furthermore, the differences between one versus two crises indicate that countries that experienced one crisis could focus more frequently on systemic risk in their strategies (sys1) than countries that experienced repeated crises (at the 10 percent significance level).

We will proceed next with estimating the marginal effects of the discussed country characteristics on the formulation of strategies. For this, we will use regression analysis and condition on a broader set of selected country characteristics.

# **5. Benchmarking the Properties of Financial Sector Strategies**

Based on our review of financial sector strategies in 78 countries, we assess the basic properties of the strategies (see table 6). Then, we construct five summary variables that we model using the regression analysis. Specifically, we construct a “strategy” variable as the count of ones in the yes/no (0/1) rating of attributes presented in table 6. Similarly, we construct variables “objective,” “risk,” “implementation,” and “tradeoff” as the count of ones in rating the attributes in table 6 marked with “obj,” “sys,” “imp,” and “trff,” respectively. We used this count variable as our dependent variable in a regression that tries to link selected country characteristics and experience to how countries formulate their financial sector strategies in general, particularly in regard to stated objectives, systemic risk considerations, implementation planning, and the trade-off between the speed of financial development and systemic risk management.

We model this count variable using a simple ordinary least squares regression with bootstrapped standard errors to properly account for the small-sample properties of our study. In addition, we employ regressors that we make weakly exogenous by using data from periods preceding the dating of financial sector strategies, by taking long-term averages, and by relying on the principle of aggregation:<sup>10</sup> where stiC = {objective, risk, implementation, tradeoff} , Xi is a vector of selected country characteristics and experience that could be relevant for the process of formulating the content of national financial sector strategies, and εi is a likely heteroscedastic disturbance.

> 10 For example, we assume that overall governance effectiveness in the public sector cannot be significantly influenced by the formulation of financial sector strategies because it relates to all sectors of public policy, only one of which is the financial sector.

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