Regulation, Financial Crises, and Liberalization Traps

Francesco Marchionne (), Beniamino Pisicali and Michele Fratianni
Authors registered in the RePEc Author Service: Beniamino Pisicoli

No 7724, CESifo Working Paper Series from CESifo

Abstract: To reconcile the mixed empirical results, we develop a theoretical model whose main implication is a concave impact of regulation on the probability of a crisis. We test this relationship by applying a Probit model of a non-linear specification to annual data from 1999 to 2011 drawn from 132 countries. The probability of a financial crisis fits an inverted U-shaped curve: it rises as regulation stringency moves from low to medium levels and falls from medium to high levels. Countries located at the intermediate level of regulatory stringency face more instability than countries that are either loosely or severely regulated. We identify the latter two groups as falling in “liberalization traps”. Institutional quality interacts significantly with the regulatory environment.

Keywords: crisis; banks; institutions; liberalization; regulation (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ban and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp7724.pdf (application/pdf)

Related works:
Journal Article: Regulation, financial crises, and liberalization traps (2022)
Working Paper: Regulation, financial crises, and liberalization traps (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7724

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().