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Taming Financial Development to Reduce Crises

Sami Ben Naceur, Bertrand Candelon () and Quentin Lajaunie ()

No 2019/094, IMF Working Papers from International Monetary Fund

Abstract: This paper assesses whether and how financial development triggers the occurrence of banking crises. It builds on a database that includes financial development as well as financial access, depth and efficiency for almost 100 countries. Through estimation of a dynamic logit panel model, it appears that financial development, from an institutional dimension and to a lesser extent from a market dimension, triggers financial instability within a one- to two-year horizon. Additionally, whereas financial access is destabilizing for advanced countries, it is stabilizing for emerging and low income ones. Both results have important implications for macroprudential policies and financial regulations.

Keywords: WP; banking crisis; banking; crisis; Financial Development; Banking crises; Regulation; banking instability; database of leaven; bank crisis predictor; banking crisis variable; banking crisis early warning indicator; banking crisis database; probability of a banking crisis; Financial sector development; Logit models; Systemic crises; Global (search for similar items in EconPapers)
Pages: 28
Date: 2019-05-06
New Economics Papers: this item is included in nep-ban and nep-fdg
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Handle: RePEc:imf:imfwpa:2019/094