Financial Reform and Banking Crises

45 Pages Posted: 11 Dec 2009  

Choudhry Tanveer Shehzad

University of Groningen; Lahore University of Management Sciences (LUMS)

Jakob de Haan

University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: December 2009

Abstract

We examine the impact of various dimensions of financial reform on the likelihood of systemic and non-systemic banking crises. Using new financial reform measures for a large sample of developing and developed countries for the period 1973 to 2002, our multivariate probit modeling results suggest that conditional on adequate banking supervision, certain dimensions of financial reform reduce the likelihood of systemic crises. We also show that after a country has reformed, the introduction of further reforms becomes easier and leads to more stable financial systems. We also find some evidence that the likelihood of non-systemic crisis increases after financial reform.

Keywords: banking crises, financial reform, financial fragility

JEL Classification: E44, G21, G28, F36

Suggested Citation

Shehzad, Choudhry Tanveer and de Haan, Jakob, Financial Reform and Banking Crises (December 2009). CESifo Working Paper Series No. 2870. Available at SSRN: https://ssrn.com/abstract=1521414

Choudhry Tanveer Shehzad

University of Groningen ( email )

PO Box 800
Groningen, Groningen 9700 AV
Netherlands

Lahore University of Management Sciences (LUMS) ( email )

D.H.A, Lahore Cantt
Lahore, Punjab 54792
Pakistan

Jakob de Haan (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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