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Financial sector in resource-dependent economies

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  • Kurronen, Sanna

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    (BOFIT)

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    Abstract

    This paper examines financial sector characteristics in resource-dependent economies. Using a unique dataset covering 133 countries, we present empirical evidence that the banking sector tends to be smaller in resource-dependent economies, even when controlling for several other factors which have been shown to have a significant effect on financial sector development in previous studies. Moreover, the threshold level at which the increasing resource-dependence begins to be harmful for domestic banking sector is very low. We also find evidence that the use of market-based and foreign financing is more common in resource-dependent economies. Further, we argue that a relatively small financial sector used to cater the needs of the resource sector might be unfavorable for emerging businesses, thereby hampering economic diversification and reinforcing the resource curse.

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    File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/2012/dp0612.pdf
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    Bibliographic Info

    Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 6/2012.

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    Length: 36 pages
    Date of creation: 22 Mar 2012
    Date of revision:
    Handle: RePEc:hhs:bofitp:2012_006

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    Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
    Phone: + 358 10 831 2268
    Fax: + 358 10 831 2294
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    Web page: http://www.suomenpankki.fi/bofit_en/
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    Related research

    Keywords: resource dependence; resource curse; financial sector; banks; panel data;

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