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Does the Size and Quality of the Government Explain the Size and Efficiency of the Financial Sector?

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  • Arusha Cooray

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Abstract

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.

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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2010-32.

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Length: 40 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:een:camaaa:2010-32

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  10. Joel T. Harper & James E. Mcnulty, 2008. "Financial System Size in Transition Economies: The Effect of Legal Origin," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 40(6), pages 1263-1280, 09.
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