Is Government Ownership of Banks Really Harmful to Growth?

42 Pages Posted: 4 Jul 2010

See all articles by Svetlana Andrianova

Svetlana Andrianova

University of Leicester - Department of Economics

Panicos Demetriades

University of Leicester - Department of Economics

Anja Shortland

University of Leicester - Department of Economics

Date Written: March 2010

Abstract

We show that previous results suggesting that government ownership of banks is associated with lower long run growth rates are not robust to adding more 'fundamental' determinants of economic growth. We also present new cross-country evidence for 1995-2007 which suggests that, if anything, government ownership of banks has been robustly associated with higher long run growth rates. While acknowledging that cross-country results need not imply causality, we nevertheless provide a conceptual framework, drawing on the global financial crisis of 2008-09, which explains why under certain circumstances government owned banks could be more conducive to economic growth than privately-owned banks.

Keywords: Public banks, economic growth, quality of governance, regulation, political institutions

JEL Classification: O16, G18, G28, K42

Suggested Citation

Andrianova, Svetlana and Demetriades, Panicos O. and Shortland, Anja, Is Government Ownership of Banks Really Harmful to Growth? (March 2010). DIW Berlin Discussion Paper No. 987. Available at SSRN: https://ssrn.com/abstract=1633841 or http://dx.doi.org/10.2139/ssrn.1633841

Svetlana Andrianova (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Panicos O. Demetriades

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom
+ 44 116 252 2835 (Phone)
+ 44 116 252 2908 (Fax)

HOME PAGE: http://www.le.ac.uk/economics/staff/pd28.html

Anja Shortland

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

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