Taming Financial Development to Reduce Crises

29 Pages Posted: 14 Jun 2019

See all articles by Sami Ben Naceur

Sami Ben Naceur

International Monetary Fund (IMF)

Bertrand Candelon

Catholic University of Louvain (UCL) - Louvain Finance (LFIN)

Quentin Lajaunie

affiliation not provided to SSRN

Date Written: May 2019

Abstract

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.

Keywords: Real interest rates, Negative interest rates, Financial safety nets, Exchange markets, Interest rate increases, financial Development, Banking crises, Regulation, bank crisis, logit, logit model, sub-indices

JEL Classification: C33, G01, G18, E01, G21, F16, G2, E52

Suggested Citation

Ben Naceur, Sami and Candelon, Bertrand and Lajaunie, Quentin, Taming Financial Development to Reduce Crises (May 2019). IMF Working Paper No. 19/94, Available at SSRN: https://ssrn.com/abstract=3404076

Sami Ben Naceur (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Bertrand Candelon

Catholic University of Louvain (UCL) - Louvain Finance (LFIN) ( email )

34 Voie du Roman Pays - L1.03.01
Louvain-la-Neuve, 1348
Belgium

Quentin Lajaunie

affiliation not provided to SSRN

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