{
  "title": "Taming Financial Development to Reduce Crises",
  "publication": "IMF Working Papers, May 6, 2019",
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  "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.",
  "sections": [
    {
      "heading": "Overview and methodology",
      "content": "- Authors: Bertrand Candelon, Quentin Lajaunie\n- Publication date: May 6, 2019\n- Publication series: Working Paper No. 2019/094 (Issue: 094; Volume: 2019)\n- Pages: 28\n- ISBN: 9781498312011\n- ISSN: 1018-5941\n- Empirical approach: estimation of a dynamic logit panel model\n- Data: database covering financial development, financial access, depth and efficiency for almost 100 countries"
    },
    {
      "heading": "Key findings",
      "content": "- Financial development can trigger the occurrence of banking crises.\n- The institutional dimension of financial development is associated with triggering financial instability within a one- to two-year horizon.\n- The market dimension of financial development is also associated with triggering instability, but to a lesser extent than the institutional dimension.\n- Financial access has heterogeneous effects:\n  - Destabilizing for advanced countries.\n  - Stabilizing for emerging and low income countries."
    },
    {
      "heading": "Analytical implications",
      "content": "- The timing of effects: identified trigger window is within a one- to two-year horizon following changes in financial development indicators.\n- The distinction between institutional and market dimensions is central for understanding pathways to financial instability.\n- Heterogeneous role of financial access implies that aggregate measures may conceal opposing effects across country groups."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Macroprudential policies should account for the finding that financial development—especially along institutional dimensions—can increase near-term systemic risk.\n- Financial regulations need to be calibrated to:\n  - Recognize the stronger destabilizing role of institutional aspects of financial development.\n  - Differentiate approaches to financial access: more restrictive or monitored expansion in advanced countries versus supportive access-enhancing measures in emerging and low income countries, reflecting their stabilizing impact there.\n- Early-warning frameworks and crisis prevention tools should incorporate dynamic logit panel model–style indicators to capture the one- to two-year horizon risk signalling.\n\nSource: IMF Working Paper \"Taming Financial Development to Reduce Crises\", Bertrand Candelon and Quentin Lajaunie, May 6, 2019; Working Paper No. 2019/094.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/05/06/taming-financial-development-to-reduce-crises-46813"
    }
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    "Authors: Bertrand Candelon, Quentin Lajaunie",
    "Published: May 6, 2019",
    "Series: IMF Working Papers",
    "Authors: Bertrand Candelon, Quentin Lajaunie",
    "Publication date: May 6, 2019",
    "Publication series: Working Paper No. 2019/094 (Issue: 094; Volume: 2019)",
    "Pages: 28",
    "ISBN: 9781498312011",
    "ISSN: 1018-5941",
    "Empirical approach: estimation of a dynamic logit panel model",
    "Data: database covering financial development, financial access, depth and efficiency for almost 100 countries",
    "Financial development can trigger the occurrence of banking crises.",
    "The institutional dimension of financial development is associated with triggering financial instability within a one- to two-year horizon.",
    "The market dimension of financial development is also associated with triggering instability, but to a lesser extent than the institutional dimension.",
    "Financial access has heterogeneous effects:",
    "The timing of effects: identified trigger window is within a one- to two-year horizon following changes in financial development indicators.",
    "The distinction between institutional and market dimensions is central for understanding pathways to financial instability.",
    "Heterogeneous role of financial access implies that aggregate measures may conceal opposing effects across country groups.",
    "Macroprudential policies should account for the finding that financial development—especially along institutional dimensions—can increase near-term systemic risk.",
    "Financial regulations need to be calibrated to:",
    "Early-warning frameworks and crisis prevention tools should incorporate dynamic logit panel model–style indicators to capture the one- to two-year horizon risk signalling.",
    "**Working Paper**"
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