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Role of Regulatory Governance in Financial Stability: A Comparison of High and Low Income Countries

Saif Ullah, Sayed Irshad Hussain (), Agha Amad Nabi () and Khurram Ali Mubashir ()
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Sayed Irshad Hussain: SZABIST, Karachi, Pakistan
Agha Amad Nabi: Dow University of Health Sciences, Karachi, Pakistan
Khurram Ali Mubashir: Department of Business Administration, Iqra University, Karachi, Pakistan

Journal of Central Banking Theory and Practice, 2022, vol. 11, issue 1, 207-226

Abstract: This study explores the effect of regulatory governance on financial stability using cross-sectional data from 55 countries. The findings show that regulatory governance and various sub-components of regulatory governance are positively correlated with financial stability in the selected countries. The results, based on the ordinary least square method, explain that the regulatory governance has a significant positive influence on financial stability in the selected countries. Further, concerning different dimensions of regulatory governance, it is showed that an individual impact of all components on financial stability is positive except for the strength of external audit, and supervisory independence and accountability. However, central bank`s independence and economic independence have a statistically significant effect on financial stability, whereas central bank accountability, supervisory independence and accountability, political central bank independence as well as the strength of external audit have an insignificant statistical influence on financial stability. Finally, the study concludes that regulatory governance and individual dimension of regulatory governance played the most significant role in improving financial stability in the selected countries.

Keywords: Regulatory Governance; Financial Stability; Selected countries. (search for similar items in EconPapers)
JEL-codes: E02 E42 E58 F02 G21 G28 G33 (search for similar items in EconPapers)
Date: 2022
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