Is Government Ownership of Banks Really Harmful to Growth?
Abstract
We put forward a modern version of the 'developmental' view of government-owned banks which shows that the combination of information asymmetries and weak institutions creates scope for such banks to play a growth-promoting role. We present new cross-country evidence consistent with our theoretical predictions. Specifically, we show that during 1995-2007 government ownership of banks has been robustly associated with higher long run growth rates. Moreover, we show that previous results suggesting that government ownership of banks is associated with lower long run growth rates are not robust to conditioning on more 'fundamental' determinants of economic growth.Download Info
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 987.
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Length: 39 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp987
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Related research
Keywords: Public banks; economic growth; quality of governance; regulation;Other versions of this item:
- Svetlana Andrianova & Panicos Demetriades & Anja Shortland, 2009. "Is Government Ownership of Banks Really Harmful to Growth?," CEDI Discussion Paper Series 09-05, Centre for Economic Development and Institutions(CEDI), Brunel University.
- Panicos Demetriades & Svetlana Andrianova & Anja Shortland, 2009. "Is Government Ownership of Banks Really Harmful to Growth?," Discussion Papers in Economics 09/11, Department of Economics, University of Leicester, revised Dec 2009.
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-24 (All new papers)
- NEP-BAN-2010-04-24 (Banking)
- NEP-CBA-2010-04-24 (Central Banking)
- NEP-FDG-2010-04-24 (Financial Development & Growth)
- NEP-PBE-2010-04-24 (Public Economics)
- NEP-REG-2010-04-24 (Regulation)
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Citations
Blog mentions
As found by EconAcademics.org, the blog aggregator for Economics research:- Regulation vs nationalization
by chris dillow in Stumbling and Mumbling on 2009-07-08 13:13:51 - What do nationalized banks do?
by chris dillow in Stumbling and Mumbling on 2010-05-28 12:47:51
Cited by:
- Gutierrez, Eva & Rudolph, Heinz P. & Homa, Theodore & Beneit, Enrique Blanco, 2011. "Development banks : role and mechanisms to increase their efficiency," Policy Research Working Paper Series 5729, The World Bank.
- Tobias Körner & Isabel Schnabel, 2010.
"Public Ownership of Banks and Economic Growth – The Role of Heterogeneity,"
Working Paper Series of the Max Planck Institute for Research on Collective Goods
2010_41, Max Planck Institute for Research on Collective Goods.
- Körner, Tobias & Schnabel, Isabel, 2010. "Public Ownership of Banks and Economic Growth - The Role of Heterogeneity," CEPR Discussion Papers 8138, C.E.P.R. Discussion Papers.
- Andrei Vernikov, 2011. "Government Banking in Russia: Magnitude and New Features," IWH Discussion Papers 13, Halle Institute for Economic Research.
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