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Economic Freedom and Banking Stability in Selected Countries

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  • Khakpoor Moghadam , Amir

    (Azerbaijan National Academy of Sciences)

Abstract

This paper investigates the role of economic freedom in banking stability by using a panel data set for the period 1998-2013 in 43 selected countries. We turn our investigation to the effects of economic freedom on banking stability. The effects of economic freedom on financial stability are estimated. This paper calculates the z-score measure for banking stability. The findings from this study seem to suggest that overall economic freedom has positive impacts on the banking stability in the selected countries. The positive sign of the coefficient indicates that higher (lower) freedom on the activities that banks can undertake increases (reduces) banks' stability, which is consistent with the view that less regulatory control allows banks to engage in various activities enabling banks to exploit economies of scale and make income from non-traditional sources. Furthermore, higher freedom on entrepreneurs helps to start businesses and job creation and consequently, increases intermediation performance which increases banks' stability.

Suggested Citation

  • Khakpoor Moghadam , Amir, 2013. "Economic Freedom and Banking Stability in Selected Countries," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 8(4), pages 137-157, October.
    • Handle: RePEc:mbr:jmonec:v:8:y:2013:i:4:p:137-157
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Financial stability; Banking; Dynamic panel data;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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