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Bank Concentration and Economic Volatility in the OIC Countries: The Role of Financial Development

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  • Edib Smolo

    (Effat University, Jeddah, Kingdom of Saudi Arabia)

Abstract

This study examines the effect of bank concentration and financial development on economic volatility in member countries of the Organization of Islamic Cooperation (OIC). Using the GMM estimator, we cover the 2000–2017 period. Based on both linear and non-linear estimations, we find no significant impact of bank concentration on economic volatility. By contrast, financial development reduces economic volatility. Moreover, the relationship between concentration and volatility is influenced by financial development. Considering this, policymakers should put more emphasis on developing the financial sector than controlling bank concentrations. We find that our findings remain robust in the face of different specifications and proxies used to measure bank concentration and financial development.

Suggested Citation

  • Edib Smolo, 2022. "Bank Concentration and Economic Volatility in the OIC Countries: The Role of Financial Development," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 24(2), pages 79-121, December.
    • Handle: RePEc:iez:survey:ces-v24_2-2022_smolo
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    References listed on IDEAS

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    More about this item

    Keywords

    economic volatility; bank concentration; financial development; OIC; GMM;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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