 Capital requirements and growth in an open economyPierre-Richard Agénor and Nihal Bayraktar Journal of Economic Dynamics and Control, 2023, vol. 147, issue C Abstract: This paper studies the effects of capital requirements, both independently and jointly with the degrees of financial development and financial openness, on economic growth. The first part illustrates how these effects operate in a simple two-period endogenous growth model with banking. The second part provides an empirical analysis based on panel data regressions for a sample of 107 advanced and developing economies. Sensitivity analysis, including with respect to potential causality and endogeneity issues, is also provided. The results show, in particular, that capital requirements can promote growth by mitigating the risk of financial crises, possibly by encouraging (in line with the skin in the game argument) prudent lending. However, financial development and financial openness tend to mitigate the growth benefits of these policies, because of increased scope for (domestic and cross-border) regulatory arbitrage and, in the case of financial openness, greater opportunities to borrow abroad. JEL-codes: E44 G28 O41 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:147:y:2023:i:c:s0165188923000015 DOI: 10.1016/j.jedc.2023.104595 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.