Taming Financial Development to Reduce Crises

By Sami Ben Naceur, Bertrand Candelon, Quentin Lajaunie

May 6, 2019

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Sami Ben Naceur, Bertrand Candelon, and Quentin Lajaunie. Taming Financial Development to Reduce Crises, (USA: International Monetary Fund, 2019) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Banking crises, Econometric analysis, Financial crises, Financial markets, Financial sector development, Logit models, Systemic crises

Keywords: Bank crisis predictor, Banking, Banking crises, Banking crisis, Banking crisis database, Banking crisis early warning indicator, Banking crisis variable, Banking instability, Crisis, Database of leaven, Financial Development, Financial sector development, Global, Logit models, Probability of a banking crisis, Regulation, Systemic crises, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/094
Stock No:

WPIEA2019094
ISBN:

9781498312011
ISSN:

1018-5941

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