Financial liberalization, insurance market, and the likelihood of financial crises

Chien-Chiang Lee (), Chun-Wei Lin and Jhih-Hong Zeng

Journal of International Money and Finance, 2016, vol. 62, issue C, 25-51

Abstract: This paper provides empirical evidence to investigate the direct impact of financial liberalization on the likelihood of currency/systemic banking crises, and examines the roles of insurance market, country risk, and economic conditional variables on the relationship between financial liberalization and financial crises in 39 countries. Our empirical results support that financial liberalization does have a significantly negative impact on the likelihood of currency/systemic banking crises, and that the indirect effects of insurance development and lower country risk decrease the probability of crises, but the indirect effect of economic conditional proxies is enhanced with the likelihood of a financial crisis. The policy implication is that the government or authority should strengthen the positive role of the insurance sector in order to combat financial crises.

Keywords: Financial crisis; Financial liberalization; Insurance market; Country risk; Panel data (search for similar items in EconPapers)
JEL-codes: E44 G22 G23 O16 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:62:y:2016:i:c:p:25-51

DOI: 10.1016/j.jimonfin.2015.12.002

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