Does the Size and Quality of the Government Explain the Size and Efficiency of the Financial Sector?
CAMA Working Paper Series 32/2010
40 Pages Posted: 30 Oct 2010
Date Written: October 28, 2010
This study examines the impact of two dimensions of the government, namely, size and quality, on two dimensions of the financial sector, size and efficiency, in a cross section of 71 economies. The study finds that while increased quality of the government as measured by governance and legal origin positively influence both financial sector size and efficiency, that the size of the government proxied by government expenditure and government ownership of banks, has a negative effect on financial sector efficiency, however, a positive impact on financial sector size, particularly in the low income economies.
Keywords: financial sector size, financial sector efficiency, government size, government efficiency, governance, legal origin, cross country
JEL Classification: O11, O16, O43, O57
Suggested Citation: Suggested Citation