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Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis

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Author Info
Kina Chenard
Udaibir S. Das
Marc Quintyn

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Abstract

This paper provides empirical evidence that the quality of regulatory governance-governance practices adopted by financial system regulators and supervisors-matters for financial system soundness. The paper constructs indices of financial system soundness and regulatory governance, based on country data collected from the Financial Sector Assessment Program (FSAP). Regression results indicate that regulatory governance has a significant influence on financial system soundness, along with variables reflecting macroeconomic conditions, the structure of the banking system, and the quality of political institutions and public sector governance. The results also indicate that good public sector governance amplifies the impact of regulatory governance on financial system soundness.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/89.

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Length: 43 pages
Date of creation: 14 Jun 2004
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Handle: RePEc:imf:imfwpa:04/89

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Related research
Keywords: Governance ; Financial systems ; Bank supervision ; Transparency ; Economic models ;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2003. "Bank Concentration and Crises," NBER Working Papers 9921, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "Paper Tigers? A Model of the Asian Crisis," NBER Working Papers 6783, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. John Chant & Alexandra Lai & Mark Illing & Fred Daniel, 2003. "Essays on Financial Stability," Technical Reports 95, Bank of Canada. [Downloadable!]
  4. Plamen Yossifov & Udaibir S. Das & Vasudevan Sundararajan, 2003. "Cross-Country and Cross-Sector Analysis of Transparency of Monetary and Financial Policies," IMF Working Papers 03/94, International Monetary Fund. [Downloadable!]
  5. Andrew Crockett, 1997. "Why is financial stability a goal of public policy?," Proceedings, Federal Reserve Bank of Kansas City, pages 7-36. [Downloadable!]
  6. Christopher Kent & Guy Debelle, 1999. "Trends in the Australian Banking System: Implications for Financial System Stability and Monetary Policy," RBA Research Discussion Papers rdp1999-05, Reserve Bank of Australia. [Downloadable!]
  7. Per G. Fredriksson & Muthukumara Mani & Richard Damania, 2003. "The Persistence of Corruption and Regulatory Compliance Failures: Theory and Evidence," IMF Working Papers 03/172, International Monetary Fund. [Downloadable!]
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  8. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Marc Quintyn & Michael Taylor, 2002. "Regulatory and Supervisory Independence and Financial Stability," IMF Working Papers 02/46, International Monetary Fund. [Downloadable!]
  10. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, 02. [Downloadable!] (restricted)
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  11. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany. [Downloadable!]
  12. Eva H. G. Hupkes & Marc Quintyn & Michael Taylor, 2005. "The Accountability of Financial Sector Supervisors: Principles and Practice," IMF Working Papers 05/51, International Monetary Fund. [Downloadable!]
  13. Udaibir S. Das & Marc Quintyn, 2002. "Crisis Prevention and Crisis Management: The Role of Regulatory Governance," IMF Working Papers 02/163, International Monetary Fund. [Downloadable!]
  14. Jingqing Chai & R. B. Johnston & Liliana Schumacher, 2000. "Assessing Financial System Vulnerabilities," IMF Working Papers 00/76, International Monetary Fund.
  15. Andrew Crockett, 1997. "Why is financial stability a goal of public policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 5-22. [Downloadable!]
  16. Garry J. Schinasi, 2003. "Responsibility of Central Banks for Stability in Financial Markets," IMF Working Papers 03/121, International Monetary Fund. [Downloadable!]
  17. Nigel Davies & Richard Podpiera & Udaibir S. Das, 2003. "Insurance and Issues in Financial Soundness," IMF Working Papers 03/138, International Monetary Fund. [Downloadable!]
  18. Marco Rossi, 1999. "Financial Fragility and Economic Performance in Developing Economies - Do Capital Controls, Prudential Regulation and Supervision Matter?," IMF Working Papers 99/66, International Monetary Fund.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jakob Haan & Sander Oosterloo, 2006. "Transparency and accountability of central banks in their role of financial stability supervisor in OECD countries," European Journal of Law and Economics, Springer, vol. 22(3), pages 255-271, November. [Downloadable!] (restricted)
  2. Marc Quintyn, 2009. "Independent agencies: more than a cheap copy of independent central banks?," Constitutional Political Economy, Springer, vol. 20(3), pages 267-295, September. [Downloadable!] (restricted)
  3. Donato Masciandaro & Maria Nieto & Henriette Prast, 2007. "Who pays for banking supervision? Principles and practices," DNB Working Papers 141, Netherlands Central Bank, Research Department. [Downloadable!]
  4. Eva H. G. Hupkes & Marc Quintyn & Michael Taylor, 2005. "The Accountability of Financial Sector Supervisors: Principles and Practice," IMF Working Papers 05/51, International Monetary Fund. [Downloadable!]
  5. Martin Čihák & Richard Podpiera, 2006. "Is One Watchdog Better than Three? International Experience with Integrated Financial-Sector Supervision (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 56(3-4), pages 102-126, March. [Downloadable!]
  6. Donato Masciandaro & María J. Nieto & Henriëtte Prast, 2007. "Financial governance of banking supervision," Banco de España Working Papers 0725, Banco de España. [Downloadable!]
  7. Jan Kakes & Garry J. Schinasi & Aerdt G. F. J. Houben, 2004. "Toward a Framework for Safeguarding Financial Stability," IMF Working Papers 04/101, International Monetary Fund. [Downloadable!]
  8. Mayes , David G., 2004. "An approach to bank insolvency in transition and emerging economies," Research Discussion Papers 4/2004, Bank of Finland. [Downloadable!]
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  9. Granlund, Peik, 2008. "Regulatory choices in global financial markets – restoring the role of aggregate utility in the shaping of market supervision," Research Discussion Papers 1/2008, Bank of Finland. [Downloadable!]
  10. Richard Podpiera, 2004. "Does Compliance with Basel Core Principles Bring Any Measurable Benefits?," IMF Working Papers 04/204, International Monetary Fund. [Downloadable!]
    Other versions:
  11. Alessandro Gambini & Marco Arnone & Salim M. Darbar, 2007. "Banking Supervision: Quality and Governance," IMF Working Papers 07/82, International Monetary Fund. [Downloadable!]
  12. Michael Andrews, 2005. "State-Owned Banks, Stability, Privatization, and Growth: Practical Policy Decisions in a World Without Empirical Proof," IMF Working Papers 05/10, International Monetary Fund. [Downloadable!]
  13. Alexander F. Tieman & Martin Cihák, 2008. "Quality of Financial Sector Regulation and Supervision Around the World," IMF Working Papers 08/190, International Monetary Fund. [Downloadable!]
  14. Richard Podpiera & Martin Cih�k, 2006. "Is One Watchdog Better Than Three? International Experience with Integrated Financial Sector Supervision," IMF Working Papers 06/57, International Monetary Fund. [Downloadable!]
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