Can Good Governance Lower Financial Intermediation Costs?

Mariusz Jarmuzek and Tonny Lybek

No 2018/279, IMF Working Papers from International Monetary Fund

Abstract: This paper argues that better governance practices can reduce the costs, risks and uncertainty of financial intermediation. Our sample covers high-, middle- and low-income countries before and after the global financial crisis (GFC). We find that net interest margins of banks are lower if various governance indicators are better. More cross-border lending also appears conducive to lower intermediation costs, while the level of capital market development is not significant. The GFC seems not to have had a strong impact except via credit risk. Finally, we estimate the size of potential gains from improved governance.

Keywords: WP; intermediation cost; bank-dealership model; bank characteristic; banks capital; transaction size; financial intermediation costs; governance; corruption; bank-dealership framework; Credit risk; Global financial crisis of 2008-2009; Capital markets; Competition; Inflation; Global (search for similar items in EconPapers)
Pages: 43
Date: 2018-12-11
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Citations: View citations in EconPapers (5)

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