Financial Integration, Banking Competition Changes and Financial Stability: The Case of the MENA Region

Arafet Farroukh ()
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Arafet Farroukh: University of Carthage FSEG

Chapter Chapter 10 in Financial Integration, 2013, pp 173-193 from Springer

Abstract: Abstract Over the past few decades MENA countries have adopted major financial reforms in favour of more financial integration which has led to changes in financial systems in general and the banking system in particular, characterized by an increased privatization process, foreign bank penetration and changes in the banking competition intensity. These changes raise many questions for the financial stability preservation especially that several banks encountered many difficulties to adapt to this new context and various followed strategies did not save many banks from significant distress situations following a considerable rise of risks. Thus, the principal aim of this paper is to study the impact of financial liberalization, banking market structure and quality of MENA institutions on the likelihood of suffering a systemic banking crisis and to seek the optimal structure of banking system able to preserve financial stability. Hence, using aggregate balance sheet data from banks across 13 MENA countries from 1990 to 2009, the paper is specifically directed towards analyzing the changes in banking structures and their capacity to ensure banking stability. After calculation of a global financial liberalization index for MENA countries, we test several hypotheses between liberalization, banking structure and banking stability in the region. Our estimations are based on a country-specific fixed-effects model. Given the challenges that MENA countries face, the empirical results of this study should be timely and helpful for policymakers.

Keywords: Financial integration index; Banking competition; Governance; Zscore (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:fimchp:978-3-642-35697-1_10

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DOI: 10.1007/978-3-642-35697-1_10

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