Regulatory Lags, Liberalization, and Vulnerability to Systemic Banking Crises

Ana Carolina Garriga

MPRA Paper from University Library of Munich, Germany

Abstract: What factors make countries vulnerable to banking crises? Particularly, how do reforms in regulation affect the likelihood of banking crises’ onset? Several recent articles describe the “anatomy” of banking crises. However, the economic indicators that precede these crises do not necessarily imply causality. Furthermore, the broader literature on financial crises finds a set of institutional causal factors to be important for financial crises, but these factors likely do not apply to banking crises. In the last 20 years banking crises have affected countries that should be impervious to them, while countries at risk have been surprisingly resilient. I argue that differences in vulnerability to banking crises are a result of the asymmetry between financial market evolution and regulation update. Although regulation tends to follow the developments in the financial market everywhere, lags in regulation have different effects at different levels of financial market liberalization. This paper analyzes the interactions between financial market liberalization and regulation update on a world-wide sample between 1973 and 2006.

Keywords: Regulatory Lags; Liberalization; Systemic Banking Crises (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 G38 (search for similar items in EconPapers)
Date: 2011-10-18
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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