Financial Reforms and Financial Fragility: A Panel Data Analysis

Syed Faizan Iftikhar
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Syed Faizan Iftikhar: Applied Economics Research Centre, University of Karachi, Karachi 75270, Pakistan

IJFS, 2015, vol. 3, issue 2, 1-18

Abstract: This paper explores the relationship between financial reforms, financial liberalization and the quality of banking regulation and supervision for financial fragility by applying a dynamic two-step system generalized method of moments GMM panel estimator technique. The finding of this study is that the financial vulnerability of the banking sector could be affected, not only by bank-specific and macro-specific variables; but also by financial liberalization and banking regulations and supervision policies. The empirical results of this study confirm the evidence that financial reforms and financial liberalization significantly enhance the likelihood of financial fragility while strong banking regulations and supervision have an inverse relationship with financial fragility. The results of this study also explain that the lag value of loan growth and unemployment contribute to enhancing financial fragility while equity to assets ratio, natural log of total assets and share of foreign banks reduce financial vulnerability.

Keywords: financial fragility; financial liberalization; banking regulations and supervision; two-step system GMM (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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