Economic Freedom and Banking Stability in Selected Countries

Amir Khakpoor Moghadam ()
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Amir Khakpoor Moghadam : Azerbaijan National Academy of Sciences

Journal of Money and Economy, 2013, vol. 8, issue 4, 137-157

Abstract: This paper investigates the role of economic freedom in banking stability by using a panel data set for the period 1998-2013 in 43 selected countries. We turn our investigation to the effects of economic freedom on banking stability. The effects of economic freedom on financial stability are estimated. This paper calculates the z-score measure for banking stability. The findings from this study seem to suggest that overall economic freedom has positive impacts on the banking stability in the selected countries. The positive sign of the coefficient indicates that higher (lower) freedom on the activities that banks can undertake increases (reduces) banks' stability, which is consistent with the view that less regulatory control allows banks to engage in various activities enabling banks to exploit economies of scale and make income from non-traditional sources. Furthermore, higher freedom on entrepreneurs helps to start businesses and job creation and consequently, increases intermediation performance which increases banks' stability.

Keywords: Financial stability; Banking; Dynamic panel data (search for similar items in EconPapers)
JEL-codes: C23 G10 G21 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mbr:jmonec:v:8:y:2013:i:4:p:137-157

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